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17 Dec 2014

Insufficient Competition In Retirement Market, Study Shows

The latest research shows that many consumers are not shopping around when it comes to getting a good annuity deal – and it seems this is due to a lack of competition in the retirement market, Employee Benefits reports.

The Financial Conduct Authority (FCA) recently conducted its Retirement Income Market Study, which looked at which products savers buy with their defined contribution pension pots to help finance their retirement. Researchers found that customers tended to buy products from their current pension provider, thus reducing any competitive pressure on these organisations and making it more difficult for competitors to attract those customers.

Perhaps more worryingly, it was found that 80% of consumers could be getting a better annuity deal by looking at the open market rather than staying with their existing provider.

The study highlighted some possible explanations as to why savers fail to fully explore the open market, including: not knowing that they have the option to change providers; not believing that the financial benefits would be worth the effort; not being encouraged to shop around; and being put off by complicated “wake-up packs” sent by providers.

In response to the findings, the FCA is calling for fewer obstacles that get in the way of retirement decisions, as well as improved communication between firms and workers. The body also feels that pension providers should create better value retirement products that meet the needs of employees.

Experts agree that the research highlights the fact that competition does not work effectively in the retirement market, and that the industry needs to adapt if customers are to get the best possible value from their savings.

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