The Financial Conduct Authority (FCA) has issued its final rules regarding the information firms should provide to consumers regarding how much they could gain from shopping around and switching provider, before they make a final decision regarding purchasing an annuity.

The new rules apply to both annuity providers and advisers who recommend these products. Advisers must, if not providing the information themselves, take steps to confirm that the provider has indeed disclosed the required information in the prescribed format.

The policy statement says on this issue:

“It follows that, where an intermediary firm is used by a consumer, both the intermediary firm and the relevant annuity provider will be required to provide the information prompt. We recognise that this potentially duplicates the information provided. The final rules, therefore, mandate that where an intermediary firm is used by a consumer, the intermediary firm is able to rely on the information prompt given by the annuity provider, if it is satisfied that it is appropriate to do so.”

A standard FCA template, known as the ‘information prompt’ will need to be used, and the following information will need to be disclosed:

• The value of the pension fund used to purchase the proposed annuity
• Whether the annuity is single or joint life
• Whether payment will be made in advance or in arrears of the start date
• Whether the income from the annuity will be guaranteed for any time period
• Whether the income will stay constant, or whether it will increase in line with inflation or at any other rate
• The provider’s own annuity quote
• Details of how the customer can shop around – here the phone number and URL for the Money Advice Service must be given
• If the customer could get a higher annual income elsewhere, the ‘prompt’ must also show what that income is and the difference between it and the level of income quoted by the provider. If an adviser offers whole-of-market advice, it would be expected that the highest available income in the marketplace would be quoted. If the adviser offers advice from a limited range of providers, and the prompt states the highest income available from that range of providers, then it should also be confirmed to the customer that higher levels of income could be available elsewhere

Regarding the issue of the number of providers available to the adviser, the statement says:

“Where the intermediary firm does not have access to every rate available, it is possible that the quote presented by the intermediary firm does not produce the best annual income available to the consumer. In that situation, the consumer would benefit from being made aware of this so they can shop around more widely if they choose to do so. If the quote presented by the intermediary firm is the highest available to the consumer, we consider that the consumer would also benefit from receiving confirmation of this.”

The new rules come into force on May 1 2018.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.