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FCA retirement market report; industry responses

Kit Klarenberg
Written By:
Kit Klarenberg

As reported by Your Money today, the Financial Conduct Authority has confirmed it will proceed with the recommendations contained in its retirement income market study. What did the experts make of the news?

The news has provoked much reaction from the pensions industry, most of it cautiously positive.

While supportive of the development of a Pensions Dashboard, Steven Cameron of Aegon believed more work needed to be done to establish the exact framework of the provision. “How best to provide a meaningful annuity quotation ‘ranking’ does need further thought, and we welcome the forthcoming consultation as a route to fully exploring challenges and solutions.”

Andrew Tully of MGM Advantage said the FCA study “confirmed what many of us in the industry have known for some time – the market is dysfunctional and not enough people are choosing the best retirement income option at the best price.” Tully attributed this phenomenon to “a lack of buyer education and too few people accessing advice – but it is also down to provider bias.”

Stressing the necessity of taking “clear and quick steps” to address the issue, Tully recommended the industry “find a way of introducing the pension passport concept sooner rather than later, as a first step in the process towards a pension dashboard.”

Mark Stopard of Partnership welcomed the news, stating that “providing people with more intuitive information in the run up to retirement, simple to understand annuity comparisons and eventually access to a pensions dashboard will go a long way towards creating engaged empowered consumers who are able to shop around with confidence.”

However, Stopard also identified potential issues for the FCA and the industry must work through in tandem. “One that immediately springs to mind is the quality of the medical and lifestyle data that will be used to develop the annuity comparison.  Someone with type-two diabetes managed by diet could receive a very different quote to someone who manages this condition with insulin – but both would answer yes to the question, ‘do you have diabetes?’.”

“In addition, with the new pension freedoms providing people with a range of solutions, it may prove difficult to compare like for like.  We look forward to working with the FCA and other members of the industry to ensure that this happens.”

Philip Brown of LV= likewise welcomed the recommendations, but said digital provisions such as the dashboard shouldn’t replace traditional advice processes. “We still believe the best way of comparing annuity quotes is through the advice process. Guidance and advice will play a key role in improving outcomes for people at retirement. We support the implementation of Pension Wise and believe the service should signpost retirees to regulated advice where appropriate.”