The regulator has investigated the use of a comparison tool, following recent retirement market research.

The idea is to provide targeted information, just before the point of purchase, to help consumers who have decided to purchase an annuity understand the benefits of shopping around.

The FCA worked with Oxera and the Centre for Experimental Social Sciences at Nuffield College, Oxford to test what difference this remedy could make.

Researchers involved with the behavioural testing concluded that the proposed comparator “should have a significant impact on shopping around” and this outcome was “robust across different (including socio-economic) groups”.

The FCA said in a statement: “The FCA's testing shows that depending on a variety of circumstances, the annuity comparator increased shopping around from 13% to 40%.

“As the research shows that the annuity comparator is an effective remedy, the FCA intends to consult on necessary rule changes later this year to introduce this as a requirement for firms.”

The research carried out for the FCA also found that ‘information overload’ could be a problem and “can quickly undermine the benefits of other features in communications”.

The report stated that testing also showed that a particular, personalised form of the remedy was most effective. Participants were over 3 times more likely to shop around for an annuity when they were shown the difference that it could make to them.

Shopping around and switching will be investigated further in a new study announced by the FCA today called the Retirement Outcomes Review.

The FCA focused on the importance of encouraging consumers to shop around after its Retirement Income Market Study identified consumers’ tendency to purchase from their existing provider as an important barrier to competition.

The principal effects of this were that incumbent providers were under less pressure to offer competitive rates to existing customers and challenger firms found it harder to attract enough business to compete, the FCA said.