By Huw Jones
LONDON (Reuters) - Insurance companies will have to show how their annuity pensions compare with rival products to ensure customers get the best retirement income, Britain's Financial Conduct Authority said on Thursday.
A pot of money saved over a working life is used to buy an annuity which pays out a regular pension until death.
The FCA was publishing findings from its study into the retirement income market after announcing in February that Britain's annuity market is disorderly with insurers maximising profits and failing to give customers the best deal.
Since then the market has changed dramatically after Chancellor George Osborne announced in his Budget there should no longer be an obligation to buy an annuity.
The FCA said on Thursday its study confirmed that competition is not working as well and proposed changes to ensure that more people get a better deal by shopping around.
The FCA also proposed replacing an industry code on pensions with its own rules and, in the longer term, offer consumers a "pensions dashboard" that would allow them to see all their lifetime retirement savings in one place.
"The Budget reforms are a game changer for the retirement income market. People will be given more choice and many will want some support to ensure they make the right decisions for them," said Christopher Woolard, FCA director of policy.
The watchdog's tone appears to have softened since February as its study found no widespread evidence of annuities mis-selling. It said the right annuity bought on the open market with an average sized pension pot offers good value.
But it will investigate further whether people with life-shortening medical conditions missed out on buying so-called enhanced annuities that pay out a higher income.
The study's findings will come as a relief to an industry still coming to grips with the biggest change in a generation.
"There is no smoking gun. In fact they have gone further than that by explicitly endorsing annuities as good value for money, but only if customers shop around on the open market," said Tom McPhail, head of pensions research at Hargreaves Lansdown.
About 420,000 annuities worth 14 billion pounds were sold annually in recent years.
(Reporting by Huw Jones; editing by Susan Thomas)