Watchdog slammed for lack of action over annuities
Anyone looking to secure a retirement income is likely to miss out on the best option, reports Simon Read
The Financial Conduct Authority has come in for severe criticism after failing to sort out the annuity scandal that leaves hundreds of thousands of people out of pocket every year.
The row blew up yesterday after the FCA admitted that the annuities market was not working. After an extensive review it said it would launch a competition market study to find out why consumers don't shop around.
But Andrew Tully of MGM Advantage said: "The review doesn't go far enough, or act quickly enough. This will potentially leave many thousands of retirees high and dry when navigating the annuity minefield."
Pensions expert Ros Altman said: "We need immediate action as more than 1,000 people every week are buying annuities and the transactions are irreversible."
Malcolm McLean of Barnett Waddingham said:"It is disappointing that we will have to wait many months more for a second-stage investigation by the FCA before regulatory action of some description can be initiated.
"The purchasing of an annuity is effectively still a one-chance opportunity. Consumers must consider that while a difference of say £30 a year between annuities may not seem very much, if they multiply this by 20 to 30 years the losses in retirement income can add up to a significant amount of money."
Annuities convert pensions pots into a retirement income, but the Watchdog's report suggested that four out of five consumers could get a higher income by shopping around.
Consequently the market is "disorderly", according to Martin Wheatley, the FCA's chief executive.
"Once you've bought an annuity you can't change your mind but for most people getting the right one could mean the equivalent of an extra £1,500 in savings," he pointed out. "So we need to understand why they aren't shopping around and switching."
Many believe the problem is the pension companies that sell annuities not doing enough to explain to people that can can shop around.
Martyn James of the Financial Ombudsman Service said that if pension firms explained how an annuity works and what they are, many complaints the FOS receives could have been avoided.
The study will examine how annuities are sold. The FCA said it would publish its initial findings in the summer and a final report within a year.
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