The FCA’s announcement of its plan to establish an annuity comparator has received a mixed reaction from the pensions industry.

Retirement Advantage pensions technical director Andrew Tully argued that while “any attempt to encourage more people to get better value from their retirement savings is welcome, […] this may not be enough to solve issues with the market”.

Tully noted that too many savers “receive poor value” from their chosen annuity as a result of not shopping around, and surprisingly since the introduction of the pension freedoms last year, this had got worse. In order to change this, “radical thinking” is needed, he said.

LV= Life and Pensions head of policy Philip Brown also made reference to the decline in pensions advice since the freedoms. “It is both unfortunate and disappointing that consumer switching has decreased since the introduction of the pension freedoms and this initiative from the FCA should go some way to reversing this trend.”

“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?,” Tully suggested.

Research from Retirement Advantage confirmed the importance of shopping around for retirement products. Two thirds of people, 68 per cent aged over 50 said they should have to shop around rather than simply accepting the product offered by their current pension company. Only 9 per cent disagreed.

Moreover, Hargreaves Lansdown head of retirement policy Tom McPhail stated: “The problem of making it easy for investors to understand the benefit of shopping around and to then act on that knowledge, has vexed policymakers for years. This proposal, to give annuity purchasers a pounds and pence disclosure of how much better off they could be will solve half the problem.

McPhail also voiced concerns that “The bit still to be dealt with is the fact that 75% of annuity purchasers could get an enhanced annuity and that won’t be reflected in this proposed disclosure.

Nonetheless, he said: “The good news is that the FCA knows this and will soon be taking steps to address that too, through revisions to the pre-retirement ‘wake-up’ packs.”

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