Annuity detriment to come under scrutiny

Insurance companies should be looking at where their customers might be experiencing detriment in annuity purchase before the FCA starts looking further, The Consulting Consortium has warned.

Rebecca Prestage, head of policy at the compliance firm, told Money Management that she expects the regulator to look in greater depth at rates offered to pensionholders.

“We are thinking that insurance companies need to be looking at their back books to try to identify areas where their customers experience detriment,” she said. “We think this is going to be an issue in the future.”

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Ms Prestage said that the regulator was supposed to publish findings into a thematic review into annuities this year but, as it has not, it must be going “a bit more in-depth”.

“We think there is going to be work for insurance companies to do,” she said, adding that if it transpires that lots of insurers have not been offering clients good rates or treating them fairly, it will be “time-consuming, costly and not good trustwise for the industry”.

Ms Prestage said that although the ABI code of conduct for retirement choices is a good start, the FCA will likely have more to say on clients who stay with their pension provider getting poor rates. The regulator does not have a problem with insurers making money, she said, but it will be interested in how they are generating profits.