The FCA is investigating a number of annuity providers amid concerns they failed to inform customers they may be entitled to a higher rate of income through an enhanced annuity.
The regulator conducted a review of 1200 non-advised sales at seven firms, which between them account for approximately two-thirds of the annuity market.
While it found “no evidence of an industry-wide or systemic failure to provide customers with sufficient information about enhanced annuities” the regulator’s enforcement team is investigating a “small number” of the firms after revealing a number of concerns.
Some providers did not even mention enhanced annuities at all when speaking to customers, and others did not tell customers they could get a higher income by shopping around.
When clear messages about enhanced annuities were given, call handlers under-played the level of increase the consumer could get by shopping around.
The FCA says that particularly when conversations took place over the phone it had concerns some customers who were eligible for enhanced rates only purchased a standard annuity.
Just Retirement group communications director Stephen Lowe says: “The FCA’s interim findings are a stark reminder that further improvements need to be made by some firms to ensure customers have the best possible opportunity to obtain good value guaranteed income for life solutions.
“The industry needs to take on board these lessons and consider how we now help those people purchasing drawdown products to get access to good information and support to shop around.”
The FCA found that between 39 per cent and 48 per cent of standard annuity purchasers may have qualified for an enhanced annuity due to health or lifestyle conditions. The annuity income forgone for the average customer was estimated at £120 to £240 a year.
Because the FCA’s review did not cover a third of the market, the regulator is now asking a small number of firms outside its original sample to review their own non-advised annuity sales.
FCA director of supervision for investment, wholesale and specialist Megan Butler says: “Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement.
“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules. Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements.”