Beneath the noise and the headlines, what did today's report from the Financial Conduct Authority into the annuities market actually tell us?
It told us that the market is not working as well as it should for 4 in 10 annuity customers, that shopping around is crucial, but overcoming barriers to get people to switch is very challenging and needs a new approach. Annuities are a popular and important product with 1,000 people a day buying a secure lifetime income, so it is vital to get this right.
The report brings robust, credible analysis to the debate and we do not disagree with its conclusions. As we said today, we want the FCA to act quickly; and we want to work together to make the changes that will help these customers get better outcomes.
The FCA showed that gain and loss for customers in the annuity market varies widely. Although the average gain from switching is little more than £1 a week, this still means a £1500 over an annuity customer's lifetime. One in 100 people could gain 20% more income by shopping around for a higher standard rate and those in ill health potentially even more.
It also confirmed some points that are often ignored in the debate. First, providers offer their customers the same rates, whether they are an existing customer or a new customer. So there is no deliberate attempt to disadvantage existing customers. Second, lack of switching is not down to lack of awareness: over 90% of customers are aware they can switch and over 60% say they shop around. Third, those with the smallest pots have less scope to gain from switching. As we set out in our factsheet today, most pots are small, and people with small pots are much less likely to switch.
It is not surprising that "the traditional method of disclosure may not be enough to change customer behaviour", especially for those with small pots. But the notion that customer behaviour must change represents a fundamental shift of approach, which the industry needs to embrace.
We are evaluating the impact of our Retirement Choices Code and believe it is having a positive effect. But it may no longer be enough to equip people with the information they need to make an informed decision - the next step is to enable customers to make these choices.
The industry is exploring ways to build on what already works well, to give every customer the right to a conversation and access to a comparison of rates to see in clear terms what switching could do for them. The system must also work better for those with the smallest pots, and it must be future-proof to account for new and different types of products and distribution - we are exploring solutions to these challenges in our New Retirement review.
This is not something the industry can solve on its own - it requires everyone with an interest in this debate to engage with solutions that work. Pension providers have a crucial role in helping customers prepare for retirement. The FCA, the industry and the wider policy community need to work together to harness that role to customers' advantage.
Rob Yuille is Policy Adviser, Savings & Retirement at the Association of British Insurers (ABI).