Two of the UK’s largest insurers have turned their guns on non-advised brokers ahead of the publication of an FCA review of the annuity market.
Providers have faced an avalanche of criticism in recent months, with pensions minister Steve Webb suggesting they are making “excessive profits” from annuity sales.
The FCA is expected to publish the findings of its 12 month thematic review into annuity pricing and shopping around later this month.
Legal & General pensions strategy director Adrian Boulding (pictured) says distribution of annuities, rather than the product itself, is the biggest problem in the market.
He says: “Increasingly a lot of bad practice is being exposed in the distribution of annuities, in particular at the non-advised end where there are all sorts of vague introducers who appear to be operating without any FCA authorisation.
“The distribution is where the heat is and the Financial Services Consumer Panel have certainly been prodding the FCA to say that some of the practice in that space is unacceptable.
“There are clear grounds for the FCA to shake up the distribution of this marketplace and tackle some of these distasteful practices.”
Aviva head of policy John Lawson criticises insurers who pay large sums to non-advised brokers. A report from the FSCP, published in December, found some non-advised annuity brokers were charging up to 6 per cent commission.
Lawson says: “Something needs to be done to clean up the non-advised market and I think regulation is probably the only way to do that.
“There are non-advised brokers out there taking up to 6 per cent commission, which is outrageous. The insurance companies who are paying that are just plain stupid and they are complicit in this bad practice.
“We would never pay a commission anywhere near that level. The commission we normally pay is closer to 1.5 per cent.”