An FCA study found that 60% of customers were not switching providers when they bought an annuity and up to 80% of these customers could have got a better deal on the open market. The new rules will come into force in September 2017 but will arrive in a declining annuity market where a number of providers have pulled out this year as income drawdown has grown in popularity.

The FCA’s Retirement Income Market Study recommended that an “annuity comparator” be established in order to encourage shopping around. The FCA is proposing that this comparator takes the form of an information prompt before an annuity is purchased.

The FCA has also announced that it plans to introduce requirements on the providers of retirement income products to provide data to the FCA about the types and volumes of products they are selling.

Under the FCA’s annuity proposals firms will be required to deliver information in a personalised form in a format set out by the FCA. This prompt will have to show the difference between the provider’s own quote and the highest quote available to the consumer from all other providers on the open market. There will also be a prompt to help the customer access the best quote – this will be a link contained in the information prompt

Christopher Woolard, executive director of Strategy and Competition at the FCA said: “Although sales have declined since the pension freedoms were introduced, annuities still play a significant role in retirement provision. It’s important that consumers shop around to get the best deal for them - yet our previous work found that very few people actually did so.

“We believe that the proposals we have outlined today will engage consumers and allow them to make better decisions, increasing shopping around and competition across the market.”

Firms will be also be required to give consumers details of whether the annuity is a single or joint life product, whether the rate of income paid by the annuity is guaranteed and the total pot that will be used to buy the annuity.