Pensions minister Steve Webb has vowed to tackle insurers who make “excess profits” from savers who do not shop around for an annuity.
The Financial Conduct Authority is carrying out a review of the annuity market, focusing on the level of detriment consumers suffer from failing to shop around at retirement.
The regulator is also analysing whether there are firms or particular groups of consumers where this detriment is more likely to occur.
The findings of the review will be published early next year.
In an interview with Channel 4’s ‘Dispatches’ programme, broadcast last night, Webb said: “Companies have clearly traded on the fact that customers don’t shop around.
“I think they are making what an economist would call ‘excess profits’. I think we have to make the market work and these sorts of profits will go.
“We have to make sure this doesn’t happen.”
The programme also saw independent pensions consultant Ros Altmann claim annuity misselling could be “at least as big” as PPI misselling – an accusation refuted by the Association of British Insurers.
ABI policy director Huw Evans said: “Insurers have signed up to a code which goes much further than the regulations in encouraging customers to shop around.
“With PPI people were bounced into buying products they couldn’t benefit from. With annuities, people benefit every single day from the income they provide.”