The pensions industry could face an annuities “misselling scandal” if the FCA finds evidence of poor practice by providers’ sales and retention teams, Ernst & Young financial services division director Malcolm Kerr warns.
Last month, the regulator published the findings of a 12-month thematic review of the annuities market. The review raised concerns about the small number of people who shop around at retirement and the FCA will now look at the sales and retention practices adopted by pension providers.
Speaking during an MM Wired debate on annuities, Kerr said insurers could be hit by misselling claims following the FCA’s investigation.
He said: “If I am an insurance company and, knowing the product was inferior, I have employed a team of sales people who were incentivised to get people to stay with that provider, I wouldn’t write a misselling scandal off as a possibility.”
Association of British Insurers head of savings, retirement and social care Yvonne Braun disagreed. She said: “We are not looking at another misselling scandal. The industry has been going above and beyond the FCA’s minimum standards and is trying to get people to the place where they shop around and switch and get the most appropriate product.”
Elsewhere, Syndaxi Chartered Financial Planners managing director Robert Reid argued that a new “collective” advice model should be developed to encourage greater engagement at retirement.
He said: “We have to look at different ways we can get the message across. Perhaps we should be thinking about the idea that, if you have got a crowd of people of a similar age who are socially friendly, you could give collective advice. That is not necessarily going into the depth you get with one-to-one advice but far better than anything we have got at the moment.”