City watchdog: Britain's pension system 'not working'

Following its review into the ‘disorderly’ annuities market, a City watchdog has concluded that the UK pensions system is flawed.

17:12 14 February 2014

A retiree’s annuity offers them with lifetime income and it could earn as much as 6.8per cent per year if they choose the right providers. However, this isn’t the case most of the time.

The Financial Conduct Authority found that about 60per cent of retirees automatically bought an annuity from the same provider of their savings without shopping around. Although others look elsewhere, very few actually switched. These people could have gotten a better deal and a more generous retirement income if they had only shopped around and bought an annuity from another provider.

Martin Wheatley, chief executive of the FCA, said: "The need to get an income in retirement unites us all. But once you've bought an annuity you can't change your mind.”

"We need to understand why they aren't shopping around and switching."

"There is virtually no market whatsoever for people with smaller pension pots. This means that for those people who need to make every penny of their pension count, the market has closed the door on them.”

"There should be competition across the entire market, not just for those with the most money."