U.S. regulators aren’t the only ones with a keen eye on the annuity marketplace. The U.K.’s Financial Conduct Authority (FCA) plans to continue its examination into whether British consumers are getting a fair deal when purchasing an annuity.

Earlier this year, the FCA announced it was undertaking the review. Recently, it published a paper based on input it gathered from various stakeholders, including regulated firms, consumer organizations and trade bodies. About 50 comments were received on a wide range of topics from publication of claims data on insurance products to publicly disseminated information on firms to transparency in the annuity marketplace. However, the report’s focus on the annuity market initiative garnered the most attention in published reports.

In the U.K., most pensioners purchase their annuities from their “host” pension provider. Yet several commentators noted in the FCA paper that consumers are often unaware they can peruse the open market for a potentially better deal. Greater transparency could improve that situation, as would comparison data and encouragement to seek professional advice, said supporters.

Conversely, opponents maintained that the main deterrent is not better information, but consumer “inertia” that could be remedied with education.

There was also some debate over the role the FCA should take in this effort, with some commentators saying it should work with other organizations like the Association of British Insurers (ABI) and the Pension Income Choice Associations.

Yet in the paper, the FCA made clear its intention to play an active role in making the annuity marketplace more transparent. “We do not accept that the inertia consumers may demonstrate is innate, nor do we think education alone can change outcome,” the report stated.

While acknowledging annuities are complex products, the FCA suggested the ABI’s Code of Conduct on Retirement Choices may not be enough to improve transparency, noting that there may be “potential weaknesses” in self-regulated codes. “Without effective oversight, clear leadership and proactive enforcement against those firms who breach the rules, industry self-regulated codes can fail to achieve what they set out to do. We will continue to monitor the ABI’s work – both on improving the information given to consumers, but also their transparency initiative – to assess whether it meets consumer needs.”

Moreover, the FCA plans to continue its review of the annuity market to determine whether consumers suffer losses when purchasing an annuity from their existing pension provider rather than opting for the open market option. It will also investigate if “particular firms pose greater risks to consumers,” and if profits in the new annuity business are too high.

In July, the FCA requested information from annuity providers, and it expects to report its findings early next year.

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