Scottish Life is considering reviewing a “representative sample” of annuity sales as pensions minister Steve Webb vowed to tackle insurers who make “excess profits” from savers who do not shop around at retirement.
The FCA 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 findings will be published early next year.
In an interview with Channel 4’s Dispatches programme, broadcast on Monday, Webb said: “Companies have clearly traded on the fact that customers do not shop around.
“I think they are making what an economist would call ‘excess profits’. We have to make the market work and these sorts of profits will go.”
The programme highlighted the case of Frank Adams, a man with a £29,000 pension pot who was sold a single-life annuity by Scottish Life in 2005, despite supplying a marriage certificate and his wife’s birth certificate with his annuity application. Adams died from cancer last year.
Scottish Life agreed to agreed to put in place the pension that would have been payable to Adams’ wife had her husband bought a joint-life annuity, backdated to December 2012.
The provider says it may review a “representative sample” of annuity sales but believes Adams’ case to be a “one-off”.
Annuity Line head of business development Billy Burrows says: “Annuity pricing is complex and clearly there is room for providers to make excess profits out of customers.”