The Financial Conduct Authority (FCA) faced a grilling from MPs over its review of the annuity market which the politicians said had ‘taken the market very little further forward’.
The FCA originally published the findings of its first part of its annuity review on 14 February. It found that 80% of consumers could secure a more generous retirement income. It is currently conducting a further review of competition in the at-retirement market.
Following the Budget announcements on 20 March, the Treasury Select Committee (TSC) stressed the importance of the FCA's review now that many people will be reassessing whether or not an annuity will suit their retirement needs.
In the Budget chancellor George Osborne announced measures to dramatically increase flexibility of pensions at retirement, cutting the 55% tax charge for people accessing their entire pension at retirement from 2015.
Under the plans, savers who take their pension as cash will get the first 25% tax free with the remaining 75% taxed at their marginal rate.
TSC chairman Andrew Tyrie said: ‘I think anyone who has looked at the annuities market ever has concluded there are elements of dysfunctionality about it. No one has ever argued that it is a functional market. It seems to be in the market review you’ve had an open goal in demonstrating that. The concern that has been expressed so far is that your presentation of that dysfunctionality does seem to have taken us very little forward.’
FCA director of policy, risk and research Christopher Woolard (pictured) said he ‘understood that frustration’ and going forward the regulator would ‘absolutely move as fast as we can’.
Conservative MP for South Northamptonshire Andrea Leadsom asked Woolard if the regulator should fundamentally change or delay its review in light of the reforms announced in the Budget.
Woolard said the regulator has altered the scope of the review to focus more on the future and has been in touch with providers over it.
He said: ‘What we’ve made clear is that the review is still ongoing. We believe that it is perhaps even more important that we conduct this piece of work.
‘What we have done is modified the questions we might ask, in particular where they might have been overtaken by bits in the Budget and we are paying far more attention to the market operating in the future taking into account the changes that have been proposed.’
He added that a number of information requests have been taken off the table.
Tyrie also opened up the evidence session by addressing the FCA’s recent ‘blunder’ when it announced its review of closed-book products with limited information which caused a sell-off of insurer’s shares.
He said: ‘Although it’s something that’s going to be looked at carefully we are not going to examine the apparent leak or pre-briefing but these are important issues we will return to on this committee but not in this session.’