The Financial Conduct Authority (FCA) has published its thematic review of the non-advised annuity sales market. The regulator says it has found no evidence of widespread mis-selling – the main concern was that firms may be failing to inform customers of the availability of an enhanced or impaired life annuity, and that customers who would have been eligible for one of these products were purchasing a standard annuity instead.
However, some firms have been asked to conduct a past business review and pay redress to customers where appropriate, and these firms are also being investigated by the FCA’s Enforcement Division. The FCA says that there appears to be a greater risk of customers purchasing the wrong product where the sale is conducted via telephone.
Standard Life has admitted it is one of the firms at which concerns were identified.
General areas of concern identified in the review include:
• Telephone sales staff are sometimes heavily reliant on call scripts, and are unable to tailor the conversation to the requirements of individual customers, or to answer their queries satisfactorily
• Some customers were not being made aware a higher income could be obtained by shopping around, while some sales staff were downplaying the level of additional income that could be obtained by doing so
• Some firms that do not offer enhanced annuities were not informing customers of the existence of this type of product
An enhanced annuity pays out more per year than a standard annuity because the customers who qualify for enhanced annuities are less likely to live to an advanced age, perhaps because they smoke or have a certain medical condition. An impaired life annuity is a special type of enhanced annuity for customers whose life expectancy is severely limited due to their current state of health, and these products provide an even greater annual income.
The scope of the review was very broad – the FCA assessed seven firms that collectively account for around two-thirds of the annuity market. 1200 sales made by these seven firms over a seven-year period were reviewed. This means that the firms asked to conduct a past business review could end up paying redress for sales made as far back as 2008.
As mentioned above, only seven firms were assessed as part of this review. However, the FCA says it has also ordered certain other annuity providers to conduct a review of their sales process. All firms in the annuity sector have been asked to consider the review findings, and the FCA also invites any consumer who feels they may not have been fully informed about the availability of enhanced annuities to contact their provider and discuss their concerns.
Megan Butler, director of supervision – investment, wholesale and specialist at the FCA said:
“Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement.
“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules. Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements.”
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.