THE FCA report seems to suggest that the lack of engagement with the open market option is a failing of customers, rather than a failure of the sales process and the market itself.
The report suggests that customers “lack confidence” to switch to a new provider, that they do not “fully understand” the decisions they need to make and that they suffer from inertia.
In reality, however, insurance companies often make it impenetrably difficult to move to another company. Reams of paperwork, full of jargon means most ordinary people have no hope of really understanding the complexities of annuities, buying from their existing provider is far faster, easier and saves much form-filling and chasing up of information and many people try to switch but end up giving up because they need the money quickly and the process is so time-consuming or difficult.
If the FCA were to require a proper and standardised process for decisions at retirement, and encourage people to use the money they will automatically pay when they buy an annuity to actually pay for advice, then customers would have a much fairer chance of doing the right thing.