The Financial Services Association (FSA) has announced it is carrying out a thematic review into annuities.
The review will look at the risk of detriment that consumers may face as a result of not shopping around when purchasing an annuity.
The review began earlier in January 2013 with discussions about a thematic review with the industry.
The review will be in two phases over the course of the year and will be taken forward by the Financial Conduct Authority (FCA) when it forms in April.
The first phase will be focused on the level of detriment from not shopping around for an annuity and whether certain groups or individuals are more likely to suffer from this. This will include a pricing survey of all annuity providers that will compare the rates available through different distribution channels such as the open market option.
The second phase of work, which will be dependent on the first, will look at whether firms’ processes for providing annuities help or hinder shopping around.
Nick Poyntz-Wright, head of life insurance at the FSA, said: “The FCA has set out its vision to make sure markets work well so consumers get a fair deal.
“An annuity purchase is an important one of decision that has long-term consequences for individuals if they get it wrong.
“We want to understand the level of the potential detriment for consumers if they do not shop around to see if there are ways to make this market work better for consumers.”