The Financial Conduct Authority (FCA) has today published an update setting out its current and ongoing work on the retirement income market. As part of this update, a revised Terms of Reference[1] for its market study into retirement income has been published. The update follows changes made to the pension and retirement income landscape announced by the Government in the Budget on 19 March 2014.
The FCA announced the market study in February after its research found that the annuity market was not working well for consumers with eight out of ten of those not shopping around and switching potentially missing out on a more generous income.
While the overarching objective of the market study remains to assess whether there are obstacles to competition working more effectively for consumers, in light of the Budget announcement we have revised its scope to give it a more forward looking focus. This will allow us to understand developments in the new landscape and identify any competition risks and potential consumer detriment.
The Budget announced plans for a guidance guarantee, on which the Government is currently consulting. The FCA is working with Government and stakeholders to develop the framework for the impartial guidance guarantee which will be offered to individuals at retirement from April 2015.
A supervisory review into sales practices of annuities was originally going to form part of the market study into retirement income. The focus of this work remains unchanged but this will now be conducted as a standalone thematic review, to report by the end of the year. Good and poor practice identified through this review will to feed in to the market study and will also form part of the evidence-base for the development of the guidance guarantee. It will also feed into the consultation on the implementation of the guidance guarantee.
Originally we had planned to issue interim findings from the market study in the summer. We will now publish this later in the year.
Notes for editors
- The revised Terms of Reference[1].
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.