The FCA is facing calls to clampdown on commission deals between pension providers as part of efforts to boost transparency in the annuity market.
Last week, the regulator published the findings of a 12-month investigation into the annuity sector.
The FCA’s review revealed 80 per cent of retirees who do not shop around could get a better deal if they did and raised concerns that people with small pots are poorly served by the market.
The review did not, however, cover commission payments paid by some providers in exchange for annuity customer referrals.
Worldwide Financial Planning IFA Nick McBreen says: “These commission-based arrangements between providers are very messy and unclear, and it does not reflect well on the industry given the drive towards transparency and fair value.
“If providers are going to receive a referral fee that should be in pounds and pence, not commission, and it should be made absolutely crystal clear to the consumer.”
LEBC longevity director Nick Flynn says: “Given the current drive for transparency it is remarkable that one insurer can partner with another insurer in what is effectively a single-tie arrangement and be paid substantial commissions when the market is moving away from that.
“I would be very surprised if any insurers think that will remain untouched because those deals will have to be changed sooner rather than later.”
The FCA is carrying out a thematic review into non-advised sales and simplified advice.