FCA review of the annuities market - NAPF comment

Commenting on the Financial Conduct Authority’s (FCA) thematic review of the annuities market, Joanne Segars, NAPF Chief Executive said:

“The FCA’s review of the annuities market has done good work in highlighting issues about which the NAPF has long shared concerns.  It is clear that consumers are better off shopping around but the stark fact remains that many do not often because of their lack of confidence and knowledge¹.

“The finding that 80% of consumers could be better off by shopping around is a damning indictment of a market that can be considered inefficient at best.  The profitability review by the FCA is particularly important as this shows the limited incentive for providers to promote the open market option in any meaningful way to consumers.  Even with the best will in the world, there is little point in telling people with small pots to use the open market option when the market is effectively closed to them.  

“The FCA’s intention to conduct a competition market study and a review of sales practices in pension providers is very welcome.  The NAPF’s own research estimates that around half a million people retiring each year are at risk of being short-changed by up to £1 billion².

“The FCA’s review of comparison websites is an important piece of work. It is not always clear to consumers what charging structure the website uses, whether it operates across the whole of the market or what size pots it serves.  Consumers need clear advice from an impartial source and are more likely to trust help from their employer or scheme.  50% of our members already offer employees some sort of advice³ and we know people expect help from their employer or scheme⁴.  This is only likely to increase as automatic enrolment grows and employers and schemes become increasingly seen as a trusted source of information about pensions.

“Consumers are currently trapped in an unfair and opaque system.  If people are to have confidence in pensions then the choices they have, and the process of converting their pension pot into an income for retirement, must be transparent and simple.  The NAPF will support and fully engage with the FCA as it undertakes its market study over the next 12 months.”

Notes to editors

The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

NAPF Workplace Survey October 2013 – almost half (49%) of respondents agreed that they are not confident that they have the knowledge to make a decision on the best deal for them on the at-retirement product.

NAPF research ‘Treating DC scheme members fairly in retirement’ Feb 2012

NAPF Annual Survey 2013.

NAPF Workplace Survey October 2013 – a third (36%) expect help from their employer.

Contacts

Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]

Eleanor Bennett, Press Officer, 020 7601 1718 or  07825 171 446, [email protected]

Aimee Savage Richards, Press Officer (interim), 020 7601 1722, [email protected]