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‘Horrified’ pension director quizzes FCA on pension freedoms strategy

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The UK’s top financial regulator has said it will not adjust its strategy to urge responsible behaviour at retirement, despite annuitisation tumbling out of favour since the introduction of pensions freedoms three years ago.

The Financial Conduct Authority’s (FCA) director of policy David Geale responded to concerns raised by NOW: Pensions policy director, Adrian Boulding, at last week’s Pensions and Lifetime Savings Association conference in Liverpool.

Boulding flagged the plummeting popularity of annuities and quizzed the FCA policy boss as to whether the regulator was planning to adjust its strategy to influence behaviours in the post-pensions freedoms landscape.

“The purchase of a secure income – an annuity – has fallen to third place in popularity,” Boulding said. “We are horrified by what has happened. First place in the popularity stakes is ‘draw out all the money and stick it in the building society’. Will your strategy help people in the post-pensions freedoms world?”

Geale said it was not the place of the regulator to intervene to affect consumer behaviours.

“The strategy reflects the landscape that we have,” Geale responded. “The strategy will not be something that is going to change social policy. It is not about saying pension schemes must do something different.”

David Geale and Lesley Titcomb

David Geale addresses the PLSA conference with Pensions Regulator CEO Lesley Titcomb

Geale said it was important that the FCA designed a regulatory framework that was appropriate to the current environment and said work was already underway to look more closely at the financial lives of consumers in retirement.

“Nobody really knew what would happen [with] pensions freedoms,” Geale explained. “What we need to do, therefore, is develop a picture that demonstrates how the market is changing and share that with relevant bodies. In the meantime, we work with what we have.”

The concerns raised by the NOW: Pensions director were underscored by a report published last week by the Pensions Policy Institute and Columbia Threadneedle Investments, which warned that people reaching retirement in the next decade may struggle to maintain the same standard of living as current pensioners.

The report found that future pensioners would likely spend more of their income than previous generations because higher numbers were likely to rent in retirement, face higher care costs, look after older relatives, or provide ongoing financial support to other family members.

In 2015, the UK government removed the requirement for pension savers to buy an annuity at retirement.

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  • David Geale and Lesley Titcomb

Readers' comments (1)

  • "In 2015, the UK government removed the requirement for pension savers to buy an annuity at retirement."

    So many publications, including the Financial Times (and now IPE), have struggled to report the change correctly. It is NOT correct to state that, before 2015, people were required to buy an annuity at retirement.

    Budget 2010 (June): "1.117 The Government will end the existing rules that create an effective obligation to purchase an annuity by age 75 from April 2011 to enable individuals to make more flexible use of their pension savings. The Government will shortly launch a consultation on the detail of this change and will introduce transitional measures for those yet to secure a retirement income who will reach 75 in the meantime."

    Budget 2011: "2.52 Pensions annuitisation – The June Budget 2010 announced that the effective requirement to annuitise by age 75 would be removed from April 2011. Draft clauses were
    published on 9 December 2010 following consultation on the details of the change during summer 2010.

    The changes were enacted in Finance Act 2011.

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  • Thanks for the clarification Richard - we will endeavour to refer to this in future.

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