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Annuities market ‘unfair and opaque’


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

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 knowledge.

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 GBP1 billion.

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. Some 50% of our members already offer employees some sort of advice and we know people expect help from their employer or scheme. 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.

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