The United Kingdom’s Financial Conduct Authority (FCA) is taking a hard look at the £12 billion annuities market, with the possibility that annuities will be banned entirely, according to one expert. A market study is set to begin as regulators are concerned that annuities for pensioners are a bad deal because they are anti-competitive and willfully confusing. In the UK, a greater percentage of retirees convert their retirement income into annuities than in the United States.
At the heart of the problem is the FCA’s concern that retirees may miss out on the best deals if they take the one offered by the provider that helped them build up their retirement savings. The regulators are also concerned about hidden fees and loss of consumer protection, especially as the number of people dipping into the annuities market (currently 400,000) is expected to double over the next few years as a result of auto-enrollment in private sector plans and an increase in the number of retirees.
