The Financial Conduct Authority (FCA) has launched a consultation on its plans to require annuity providers to inform consumers about how much they could gain from shopping around before a potential annuity purchase.
The introduction of an annuity comparator aims to encourage individuals to shop around for a competitive annuity product before making their selection.
This would be delivered in the style of an information prompt, which would show individuals the difference between their provider’s quote and the highest quote available from other providers on the open market. The prompt will also allow individuals to access the best quote via a link.
The proposals follow the FCA’s Retirement income market study, published in March 2015, which recommended the annuity comparator as one of the measures that could support consumer choice in the market.
Providers will also be required to inform individuals whether the annuity is a single or joint life product, whether the rate of income paid by the annuity is guaranteed, as well as the total pot that will be used to buy the annuity.
In addition, the FCA will introduce requirements on income product providers to provide data to the FCA about the types and volumes of products they are selling.
Under the proposals, the new rules would come into effect from September 2017.
The consultation seeks views on when the information prompt should be delivered to consumers, the scope and content of the information prompt, and when providers should implement the changes.
The consultation will remain open to responses until 24 February 2017.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Although sales have declined since the pension freedoms were introduced, annuities still play a significant role in retirement provision. It’s important that consumers shop around to get the best deal for them; yet our previous work found that very few people actually did so.
“We believe that the proposals we have outlined will engage consumers and allow them to make better decisions, increasing shopping around and competition across the market.”