The UK's financial watchdog will force annuity providers to tell customers to shop around after it found that 80 per cent of customers would get a better dealing by doing so.
The Financial Conduct Authority (FCA) today revealed its own Black Friday push with plans for an "annuity comparator" to help people find out if there is a better deal with another provider.
The FCA's exec director of strategy and competition Christopher Woolard said that although annuities may have fallen out of favour with many in the wake of former Chancellor George Osborne ushering-in his pension freedoms; "annuities still play a significant role in retirement provision".
In news that will astonish those hunting for a bargain on Black Friday, FCA's previous research revealed that 50,000 people, or 60 per cent of the market, do not shop around to get the best annuity deal.
Woolard added: "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 today will engage consumers and allow them to make better decisions, increasing shopping around and competition across the market."
Tom Selby of financial adviser AJ Bell said the plans would be welcome news to those in Britain hit by low annuity rates and lack of competition as insurance companies withdraw from the market.
Arming people with information about annuity deals available elsewhere should help redress the competitive balance in the annuity market and hold insurers’ feet to the fire when it comes to pricing.
The effectiveness of this measure will depend on the extent to which consumers actually read and react to the information provided.
Not all experts applauded the initiative. Andrew Tully of Retirement Advantage said he "fear[ed] this may not be enough to solve the issues with the market".
Tully lamented government plans to scrap a secondary annuity market. He said this would have given a greater degree of flexibility in terms of shopping around for the best deal. And instead of an "annuity comparator", he felt a lighter touch approach might be more suitable.
Given the secondary annuity market was effectively going to introduce compulsory shopping around, and our research shows two-thirds of pre-retirees would welcome such a move, why not simply introduce a requirement that people need to get a number of quotes before they can purchase an annuity.