While pensioners may have lost out on billions through mis-sold annuities, the UK’s largest annuity providers have said they will not be reviewing their sales following a case of mis-selling.
Pensioners could have collectively lost out on £8.5bn through mis-sold annuities over the past decade, according to government pension advocate Ros Altmann.
She has calculated this based on around 3m people buying annuities over that period, with an estimated 1.8m buying the wrong one.
Her calculations follow Aviva’s admission that it had mis-sold a number of annuities. Approximately 250 of the Norwich-based firm’s customers had been affected by an “error in the sales process”.
They would have qualified for an enhanced annuity but were instead sold a normal one without having been asked any health questions during the telephone sales process. The company said it has closed the telesales operation in question and made average back payments of £500.
Aviva’s error has sparked concerns about annuities becoming another mis-selling scandal, but providers said they did not need to review their sales.
Jamie Jenkins, head of workplace strategy at Standard Life, said: “At retirement, we do our utmost to ensure every customer has a conversation with us, or their financial adviser, to go through the options.
“We also carry out regular audits to ensure customers’ level of understanding and awareness of all the options.”
A spokesman for Prudential said: “For advised annuity sales, our advisers always meet customers face-to-face, and we have processes in place to ascertain the customer’s health as part of the fact-finding process.
“In respect of non-advised annuity sales, our processes ensure that customers are made aware of their right to shop around for an annuity, and that an enhanced annuity may be available if a customer is affected by certain health factors.”
A spokesman for LV= said: “The majority of our annuities are sold by advisers, although we do have an in-house team that sells our products.”
Partnership, Legal & General and Just Retirement also said they didn’t consider it necessary to review their annuity sales.
Adviser view
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “The FCA is investigating the retirement income market because competition has demonstrably failed many pensioners.
“Annuity brokers and advisers help customers to find the best terms for their particular needs; the problem is that far too many people do not benefit from a shopping around service.”
