The Financial Conduct Authority has given pension providers and annuity websites the green light to continue extracting excess profits and charges from consumers.
That was the widespread criticism of this week's long-awaited review, by the regulator, of the way people buy their retirement income in a market worth £14 billion a year.
The FCA said 80% of people who accepted an annuity from their pension company got a worse deal than if they had shopped around, and those with the smallest pension pots and the worst health had the least choice. It also found that annuities sold to captive customers were "more profitable" than those sold in the open market, and that sales websites operated "poor practices", which would be stopped. But any other action would have to await "a competition market study and further supervisory work" which would take another year or more.
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Most pension companies welcomed the review. Aegon said it "particularly welcomes the forward-looking aspect of the study, looking at changing consumer needs and future engagement opportunities".
But the Institute of Directors said: "This review misses the point... launching a year-long enquiry will only create more delay and uncertainty."
Andrew Tully, pensions technical director at MGM Advantage said: "The FCA review doesn't go far enough, or act quickly enough. Another year or two of customers sleepwalking into retirement is simply not good enough."
Alan Higham at the Fidelity-owned Annuity Direct comparison service, said: "The first step that the FCA must take is to ensure that insurance companies cannot sell badly priced annuities to their own captive customers without being able to clearly show that their customer made an informed choice to deprive themselves of thousands of pounds of income in retirement that they can ill afford to lose."
Malcolm McLean of consultants Barnett Waddingham said: "It is disappointing that after a full year we still have to wait many months more for a second stage investigation," and Gina Miller, founder of the True and Fair campaign, said: "If your home was burgled and you knew who the burglar was, would you expect the police to take a year to respond?"
A comprehensive critique came from former Downing Street adviser Dr Ros Altmann, who has been campaigning on annuities for over a decade. She said: "Those in poorest health and those with lowest savings are most at risk, yet the regulator is still not taking action. If the FCA knows that many companies do not offer annuities suitable for people in poor health, why does it not ban them from selling a standard annuity to such customers? The way annuities are sold, without any suitability or 'know-your-customer' checks, makes it inevitable that many people will not have the chance to make best use of their hard-earned pension savings."
Dr Altmann said the FCA assumed that all would be solved by getting more people to shop around. It had ignored "the lack of disclosure of hidden charges, and the ongoing failure to ensure customers are written to in plain English and understand the jargon being used".
She went on: "Even more worrying, the FCA seems to believe that using broking websites 'allows people to buy an annuity direct, which can save money by forgoing professional financial advice'. This is actually not necessarily true. The FCA's own rules allow the sites to charge commission, with no controls on those charges, which can result in customers paying more for non-advice than for full advice."
Dr Altmann concluded: "The insurance industry has had years to get this right, but so far the pace of change has been glacial. Meanwhile, millions of pensioners may be poorer for the rest of their lives, as they have bought annuities that are not right for them, and will never be able to change them."