LONDON, June 9 (Reuters) - Britain’s financial watchdog has changed the scope and timing of a study into the annuities market in response to unexpected reforms announced by the government.
The Financial Conduct Authority in February had published plans to review annuities - products sold by insurers that pay an income until death in exchange for a retiree’s pension savings pot.
The review found that the annuities market was disorderly with too little competition and the FCA launched a study of sales practices which was due to be completed in the summer.
But in March Britain’s finance minister George Osborne unveiled a shake-up of the pensions system that effectively put an end to an obligation to purchase an annuity with retirement savings.
This effectively dismantled a captive market for annuity providers such as Prudential Legal & General and Friends Life, which will now have to compete for pensions business against other investment products.
This means the FCA’s review needs to change to take into account the reshaped market for retirement products that is likely to emerge, the watchdog said on Monday.
“New products and business models are likely to arise,” the FCA said. “We will look to understand how the market is likely to develop in these respects and in relation to existing products in order to identify potential competition risks and vulnerabilities to consumers in the new landscape.”
The regulator said its original study of how annuities were being sold was part of a broader review of retirement income. Its review of annuities will now be conducted as a standalone study with results reported towards the end of 2014. (Reporting by Chris Vellacott. Editing by Jane Merriman)