LONDON (Reuters) - The Financial Conduct Authority is considering action to ensure pensioners are not duped into buying annuities that give them a poor deal for their life savings by financial services firms.
In a statement published on Monday the regulator said it was reviewing the annuities market, aiming to make sure consumers are not prevented from shopping around for the best deal.
The probe was prompted by fears pensioners are not given enough information by pension providers on what annuity products are available on the open market, leaving many to transfer funds automatically to their in-house products.
“We are seeking to build a comprehensive picture of the market and to establish whether further regulatory interventions could help consumers make the most of their income in retirement,” the FCA said.
In February, the Association of British Insurers (ABI), whose 350 members run some of Britain’s biggest pension schemes, pledged to help pension savers find the best retirement deal.
The ABI said its members had signed up to a “Code of Conduct on Retirement Choices”, requiring them to spell out options for buying an annuity, which converts pension savings into retirement income, up to two years before an individual retires.
The ABI code followed a probe by regulators in January into whether retirees who buy an annuity directly from their pension provider pay more than they would if they had shopped around.
Regulators also said they would look into whether insurers hinder their customers from shopping around.
The FCA acknowledged the ABI’s “proactive lead in improving transparency around annuities”. But added it was also aware of “the potential weaknesses of industry self-regulated codes”.
The regulator said it planned to invite representatives from industry and consumer organisations to contribute to a debate on the annuity market.
“If this work does lead to new rules on firms, these would be developed in line with our policy framework. We would consult on the issue so stakeholders would have another opportunity to provide input,” the FCA said.
Reporting by Chris Vellacott; editing by David Evans