Today, the Financial Conduct Authority (FCA) presented its plans to improve information disclosure of annuity providers towards consumers. This proposal is based on the FCA’s Retirement Income Market Study, which found that 60 percent of consumers were not switching providers when they bought an annuity and up to 80 percent of these consumers could get a better deal on the open market. The FCA made the following propositions to be realized by September 2017:
- The introduction of an "annuity comparator" should help to encourage the shopping around of customers. This comparator would be implemented as an information prompt before an annuity is purchased.
- Annuity providers will have to disclose information in a personalized form following a format provided by the FCA. Such a prompt would have to entail the difference between the provider’s own quote and the highest quote available to the consumer from all other providers on the open market. This prompt also contains a link for consumers to access the best quote.
- In order to further increase transparency providers will be required to give consumers details of whether the annuity is a single or joint life product, whether the rate of income paid by the annuity is guaranteed and the total pot that will be used to buy the annuity.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA commented about this: "Although sales have declined since the pension freedoms were introduced, annuities still play a significant role in retirement provision. It’s important that consumers shop around to get the best deal for them - yet our previous work found that very few people actually did so. We believe that the proposals we have outlined today will engage consumers and allow them to make better decisions, increasing shopping around and competition across the market."
Source: Financial Conduct Authority