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Misselling alert on lifetime annuities

Living Time chief executive Kim Lerche-Thomsen has branded lifetime annuities as “Dickensian” products and claims they could become the next misselling scandal.

Speaking at Adviser Live 2008 in London last week, Lerche-Thomsen said if lifetime annuities were invented today, they would be a niche rather than a mainstream product.

He said if inflation and interest rates rise significantly, annuities could be the next misselling scandal as policyholders are locked into products which do not offer any flexibility.

Intelligent Pensions managing director Steve Patterson said annuities will continue to be the main product sold to retirees until the Financial Ombudsman Service changes its attitude to other decumulation products. He said: “There is going to continue to be a problem for advisers mainly because of the disconnect between the way the FOS regards the risks in retirement.

“There is a problem with trying to get the FOS to understand that it is not the case that anything other than an annuity is not suitable for a client. Our trade bodies should be making representations to the FOS about this because it is a real issue.”

Worldwide Financial Planning IFA Nick McBreen said advisers will face major challenges in giving retirement advice until the Government ends means-testing.

McBreen said: “The Government should empower advisers to be able to advise on pensions again. Once the issue of means-testing is sorted, advisers can get on with the job of advising.”

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