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Providers could face annuities ‘misselling scandal’

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.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I can smell the pack of ravenous CMCs circling and growling even as I write.

  2. William Watling 13th March 2014 at 2:53 pm

    Malcolm replied to my Q. The point I made was that if providers have knowingly sold or retained clients in annuities whose rates were lower than they’d offer new clients, then surely this isn’t “treating customers fairly” in the same way PPI was mis-sold to clients who didn’t need it!

  3. Alan, as with the PPI issue or the endowment issue you only need to fear the CMC if you mis-sold something.

    As with PPI the responsible and good quality CMC’s didn’t go after IFA’s because good quality IFA’s didn’t sell that rubbish. It would be the same with annuities, IFA’s looked at the best product and only sold the best product. The only IFA’s that need to be even vaguely concerned would those that didn’t look at enhanced (where appropraite) or potentially the whole of market.

    If anything you should be embracing the potential of an annuity mis-selling scandal – the only thing that could come of it would be that everyone would HAVE to use the OMO and would HAVE to speak to an IFA. Unfortunately there will probably be the influx of poor quality CMC’s into the market but at least we have the MOJ and the FOS to look after us all. Oh sorry forgot, both of them are entirely unfit for purpose.

    As for the ABI stating this is not another mis-selling scandal, i do believe that were saying that about PPI some years ago. The only point at which any insurance company has been ‘going above and beyond’ FCA guidelines was when this whole issue started to rear it’s head a few years ago. Insurance companies have been doing the absolute bare minimum for years and will continue to do so.

  4. So, Mr Smith, we know that if you are in poor health the absolute last thing in the world you want is a conventional single life annuity but here have one of ours, oh and the rates are rubbish too but never mind you may not live long enough for it to make any real difference. And that is NOT mis-selling !!!

    Now, knowing how many qualify for an enhanced annuity and how many enhanced annuities have been sold the math is not hard and does, I’m afraid point to a grat many IFA’s who either could not been bothered or did not know how to do a fully impaired annuity.

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