The FCA has highlighted the emerging problems stemming from pension freedoms with many savers abandoning their pension, record numbers moving into non-advised drawdown and an overall lack of product innovation.
In its retirement outcomes review, published today, the regulator says while the pensions market since the reforms is still evolving, there are issues building up that may warrant FCA intervention.
It found over half of the fully withdrawn pension pots were not spent but transferred into other savings or investments. The FCA attributes this in part to a general mistrust of pensions, but says this could lead to consumers paying too much tax or missing out on investment growth.
The regulator raises concerns about the proportion of savers going into non-advised drawdown moving from 5 per cent to 30 per cent since the reforms were introduced.
It has also warned the number of annuity providers pulling out of the open market is hitting competition, and of limited product innovation.
FCA executive director of strategy and competition Christopher Woolard says: “We have identified areas where early intervention may be needed either now or further down the track to put the market on the best footing for the future.
“Ensuring this market works well will require cooperation across Government, regulators, the industry and consumer bodies.
“We will work closely with stakeholders to make sure we are clear on the actions we are best placed to lead.”