Tuesday, 18 March 2014 12:39
MPs may seek separation between pension pots and annuities
An influential group of MPs has warned that it may demand clear separation from providing pension schemes and annuities.
Following the FCA's damning recent report on what it called the 'disorderly' annuities market, the Work and Pensions Committee has called again today for firm action.
It said the Government might have to create a clear division between the provision of annuities and pensions if improvements are not made.
The report, which was published today, said: "We reiterate the recommendation from our 2013 report: that, if improvements in the annuity market do not occur soon, the Government might, as a last resort, have to consider taking steps to separate the function of providing pension schemes from that of providing annuities.
"We recommend that the Government and the FCA take urgent action to make the open market option a realistic one for all those who purchase annuities, not just the minority who are currently able to negotiate it successfully."
{desktop}{/desktop}{mobile}{/mobile}
The FCA said that the market was failing consumers but the MPs said in their report this had been known for some while.
The MPs said in their Third Report Monitoring the Performance of the Department for Work and Pensions in 2012-13: "The Financial Conduct Authority's intention to carry out a market study of retirement income products, following on from its thematic review of annuities, is welcome.
"However, the Government and the regulators have had clear evidence for some time that the open market in annuities is not yet working in the best interests of the majority of pension scheme members, many of whom face the risk of substantial financial loss in purchasing an annuity from their pension provider."
The FCA closed its consultation period this week for its Retirement Income Market Study – which followed on from the review of annuities.
The regulator is examining whether the retirement income market is working well for consumers and will consider measures that could be implemented to promote competition.
It will look at products which are purchased from a pension pot that provide an income during retirement including:
• Annuities
• Income drawdown
• Other alternative products
Following the FCA's damning recent report on what it called the 'disorderly' annuities market, the Work and Pensions Committee has called again today for firm action.
It said the Government might have to create a clear division between the provision of annuities and pensions if improvements are not made.
The report, which was published today, said: "We reiterate the recommendation from our 2013 report: that, if improvements in the annuity market do not occur soon, the Government might, as a last resort, have to consider taking steps to separate the function of providing pension schemes from that of providing annuities.
"We recommend that the Government and the FCA take urgent action to make the open market option a realistic one for all those who purchase annuities, not just the minority who are currently able to negotiate it successfully."
{desktop}{/desktop}{mobile}{/mobile}
The FCA said that the market was failing consumers but the MPs said in their report this had been known for some while.
The MPs said in their Third Report Monitoring the Performance of the Department for Work and Pensions in 2012-13: "The Financial Conduct Authority's intention to carry out a market study of retirement income products, following on from its thematic review of annuities, is welcome.
"However, the Government and the regulators have had clear evidence for some time that the open market in annuities is not yet working in the best interests of the majority of pension scheme members, many of whom face the risk of substantial financial loss in purchasing an annuity from their pension provider."
The FCA closed its consultation period this week for its Retirement Income Market Study – which followed on from the review of annuities.
The regulator is examining whether the retirement income market is working well for consumers and will consider measures that could be implemented to promote competition.
It will look at products which are purchased from a pension pot that provide an income during retirement including:
• Annuities
• Income drawdown
• Other alternative products
This page is available to subscribers. Click here to sign in or get access.