Do the recent FCA findings on the sale of annuities reveal yet another shocking scandal of rip off pensioners?! Is this the next mis-selling scandal?
The Financial Conduct Authority (FCA) has the duty to promote competition in the interests of customers in the financial markets. One of the biggest financial investments anyone makes concerns pensions and annuities. The FCA has recently carried out a review of the market of pension annuities. Annuities make up a large proportion of the pension market. In 2012, 420,000 annuities were sold to a value of £14billion.
Most people purchase an annuity when they come to retirement (rather than the alternative of an income drawdown), but many chose to stick to their pension provider instead of shopping around. This means that annuity providers are benefitting by up to £230 million every year as 80% or people stick with the same company. Up to 20% more could be gained by shopping around.
Beware of comparison websites
The FCA found that selling annuities to existing customers was significantly more profitable than attracting new customers on the open market. Providers are also accused of failing to offer enhanced annuities to existing customers; these enhanced annuities take into account medical conditions and lifestyle choices (which may shorten life expectancy) and which ought to result in higher annual payments.
Even if you do shop around, the FCA has found that comparison websites are misleading customers. It has been found that the information provided on such sites does not comply with the rules that information should be fair and not misleading.
The use of comparison websites is growing. New rules in place mean that providers have to disclose their costs up-front, rather than charge commission. However, several comparison websites involve what are known as ‘non-advised sales’ which mean brokers can still charge commission. The FCA has taken the issue so seriously that it has served a notice on the guilty websites to improve; but that will be too late for those who have already taken out annuities from websites.
Have you been mis-sold an annuity
We anticipate that in view of the FCA’s findings the sale of annuities could be the next mis-selling scandal. The claims could be significant since consumers are often locked into such annuities for life.
If you have bought a pension annuity and believe that you were misled into doing so either by your provider (whether or not through a comparison website), a financial adviser or a broker you could be able to claim compensation. At Redress Law we are expert at dealing with such financial claims, so please get in touch and we will carry out a free investigation into whether you were mis-sold your annuity. That compensation may give you the money you expected to receive to enjoy your retirement and in the current climate of low interest rates maximising income is vital for most people.
