LV= wants a £25 charge to be levied on insurers for every existing customer who takes out an annuity to help fund the cost of the Government guidance service Pension Wise.
The charge would exclude savers who choose enhanced annuities or alternative products, but LV= estimates that the charge would catch 60,000 annuities per year, creating an additional £1.5m in funding.
LV= managing director of retirement services John Perks compares the charge to a “polluter pays” levy, forcing firms to foot the bill for negative market conditions they create.
He says: “There is a need to secure the long-term and sustainable funding of Pension Wise, and we believe this needs to be linked to consumer outcomes and industry behaviour.”
Perks acknowledges the charge would include savers opting to retain their provider even after receiving advice, but argues this would be mitigates by the benefits of a simple levy.
He says: “I’m not saying that everyone that internally invests is going to get a bad deal, but there is agreement that is probably going to be the area where people might get a worse outcome.
“Providers will argue that people who stay with them are getting good deals. But those are the same arguments that that have been used for years and created the situation where consumers aren’t aware of what is going to happen.”
The plans come just under three months after an FCA review of the annuities market found examples of pensions providers “actively” ignoring shopping around principles included in a code of conduct drafted by the Association of British Insurers.
Current FCA rules require providers to highlight Pension Wise, as well as the possibility of regulated advice.
However, LV= is demanding the regulator goes further, and bans pensions providers marketing retirement products to customers until they have confirmed the have used Pensions Wise, sought regulated advice, or have actively chosen to take neither option.