Aviva UK Life chief executive David Barral has launched a stinging attack on rival providers for exploiting their customers by failing to offer enhanced annuities.
Policymakers are coming under growing pressure to address perceived failings in the annuity market, with an FCA review of annuity profit levels and shopping around due to be published next month.
Earlier this month pensions minister Steve Webb suggested people should be allowed to switch annuity providers if they can get a better deal elsewhere.
Barral says the practice of providers selling standard annuities to customers without checking if they could qualify for an enhancement is a “complete and utter scandal”.
He says: “There are providers that are exploiting inertia from customers because they do not offer annuities that are enhanced due to medical conditions, so the customer ends up with a really poor deal. We think that is not acceptable.
“30 per cent of the market is about enhancing the annuity based on medical conditions and yet there are companies out there that find it OK just to let the customer buy an annuity from them even if they don’t offer an enhanced annuity. We think that is a complete and utter scandal.”
Barral says regulation may need to be strengthened to force people to shop around at retirement.
He says: “Customers have to understand there is a full stop between them saving for retirement and then choosing which provider can offer the best income.
“That might have to be done through regulation because we need to force customers into demonstrating they understand the choice they are making and the comparison with rates in the marketplace.”
Hargreaves Lansdown head of pensions research and Pension Income Choice Association chairman Tom McPhail says: “This message about the importance of shopping around is precisely the one Pica has sought to promote these past few years.
“Perhaps now we are seeing even major life insurance companies actively promoting this agenda, policymakers will recognise the value and importance of restructuring the retirement process.”