Most people who buy annuities do not understand them and should have to get basic advice before buying one, says Downing Street policy adviser Dr Ros Altmann.
She says people on low incomes are losing out on annuities and she is calling for a basic level of mandatory advice covering product structure and rates at the time an annuity is bought. The advice could be provided by a second tier of adviser.
She says annuity products already contain provision for advice within the pricing structure so the Government should take steps to ensure advice is received across the board.
Research by YouGov shows widespread misunderstanding of annuities. Only 47 per cent of men and 35 per cent of women felt they knew how to find the best market rate.
But among those who thought they understood annuities, 64 per cent of men and 72 per cent of women thought they could change their annuity once they had bought it.
Altmann says: “The lowest-income groups do not get the advice and so do not get the best rates. Many annuity providers know they are not offering a good rate – it is almost like misselling. Everybody should have basic level specialist advice to see they get a decent rate.”
Britannic Retirement Solutions corporate development director Bob Bullivant says: “Two-thirds of people do not exercise the open market option – two-thirds do not get advice. We need to make exercising the open market option as natural as not exercising it and Altmann's proposal would help that.”