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Budget bombshell prompts FCA to delay retirement income review
by Dylan Lobo on Jun 09, 2014 at 11:30
The pension revolution revealed in this year's Budget has prompted the Financial Conduct Authority to adjust the review into the retirement market.
The regulator said its review of sales practices of annuities will now be a standalone thematic review, on which it will report by the end of the year.
In February, the FCA announced it was set to probe competition in the retirement income market after its review into the annuity market found that 80% of consumers could secure a more generous retirement income by shopping around.
A month later 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.
Due to the Budget changes the FCA has revised the terms of reference of its retirement income review to include a study into the new market landscape and will look into value for money of retirement income products in the existing and new market landscape.
It will also look at how consumers, providers and intermediaries are likely to behave in the new market landscape.
Findings that were due to be published this summer will now be published later this year.
The FCA said: ‘While the overarching objective of the market study remains to assess whether there are obstacles to competition working more effectively for consumers, in light of the Budget announcement we have revised its scope to give it a more forward looking focus. This will allow us to understand developments in the new landscape and identify any competition risks and potential consumer detriment.’
The FCA will also be using this study to help its work in developing the guidance guarantee.
‘In our market study we will identify whether there are issues to address in the final version of the guidance guarantee as well as whether there are wider consumer protection issues that the FCA should also address.’
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