The FCA is being urged to crack down on pension providers after the regulator’s annuities thematic review raised concerns about a lack of competition in the market.
The FCA’s thematic review, published last week, reveals 80 per cent of people who buy an annuity from their existing provider would be better off if they shopped around and switched provider.
The regulator also reviewed 10 firms’ annuity books and found business sold to existing customers is more profitable than business sold through the open market option.
Annuity Direct chairman Alan Higham says: “The first step the FCA must now take is to ensure insurance companies cannot sell badly priced annuities to their own captive customers without being able to clearly show their customer made an informed choice to deprive themselves of thousands of pounds of income in retirement that they can ill afford to lose.
“It is simply not good enough to say we sent out a pack that had all the information when clearly customers were making choices that were consistent with a total lack of understanding of the issues.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Insurers have been the principal culprits in selling poor value products over the years and annuity brokers are working towards adopting minimum standards in how they deal with their customers.”
Association of British Insurers director general Otto Thoresen says: “We recognise our industry can do more to make the market work effectively for customers which is why we are finalising a new package of measures to enable people to engage and to shop around for better deals.”