The Financial Conduct Authority has instructed several annuity comparison websites to remedy problems uncovered during a parallel probe to its wider review into the annuities market.
As part of its work reviewing the annuity sales market, the FCA looked at 13 websites which offer a full annuity quote - rather than a callback over the phone. It said all but one failed to meet requirements to be ‘fair, clear and not misleading’.
Often important information and warnings about risk were either missing or not prominent enough - and in some cases the service was described as being free despite the firm receiving commission for a sale.
There were examples of good practice, the FCA said, including use of jargon-free language and the presentation of alternative options such as deferring or pension drawdown.
The FCA estimates that 6 per cent of people looking to buy an annuity use a comparison website. This suggests that of the approximately 420,000 people who bought an annuity last year, about 25,200 used such a site.
In order to comply with requirement to be fair, clear and not misleading, comparison sites should, among other things:
• explain the open market option and its potential benefits;
• make clear that the purchase of annuities is usuall final;
• present alternatives to buying an annuity;
• clarify that income depends on the size of pension pot and varies from person to person;
• remind customers they could lose guaranteed rates if they change provider; and
• clearly say what the relevant commissions or charges are.
The regulator added that other comparison service providers should heed the warnings resulting from the review and make the necessary changes on their own initiative.
