Non-advised annuity comparison websites will not have to adhere to the same rules as full advice firms and can display charges only as a percentage, the regulator has confirmed in final guidance for the sector.
The 12 firms, consumers and trade associations that responded to the review were mainly supportive of the initial guidance, but questioned whether commission and charges should be expressed as a monetary figure or in percentage terms.
The Financial Conduct Authority FCA declared in its annuity comparison website review conclusion, published today (20 June) that whether it appears as a percentage or monetary figure will depend upon the context and individual circumstances of the consumer in order to be accurate and relevant.
It said it would expect charges to be “clear, fair and not misleading”, but that it would leave the final decision to firms.
Previous thematic reviews had stated that advice firms must first provide ‘generic’ pricing information including how much they charge and on what basis, followed by specific information to individual clients estimating how much it would cost them to receive advice.
This means giving an approximate pounds figure where a firm charges a percentage, or an estimate of the number of hours of work involved where charges are given hourly.
Respondents to the FCA review also suggested that the term ‘commission’ should be replaced by ‘non-advised fee’, so that consumers are aware that the payment comes out of their pension fund, but the final guidance said the new term had the potential to cause confusion, with ‘commission’ being the industry standard.
On guaranteed annuities periods and rates, there were concerns that further detail should be provided by annuity comparison websites regarding the different types of guarantees available, including annuities that provide an income after a partner’s death.
Therefore a new point has been introduced to reflect that guarantees can be obtained including for surviving partners and the twelfth bullet point now includes the phrase ‘other benefits’.
Several respondents felt greater detail should be provided on the FCA’s expectations of how firms present restricted panel information, so guidance now reads that “with a restricted panel the providers searched should be identified, including where a restricted panel for enhanced annuity quotations has been used”.
In February the City watchdog instructed several annuity comparison websites to fix problems uncovered during a parallel probe to its wider review into the annuities market. All but one of the 13 websites it looked at failed to meet requirements to be ‘fair, clear and not misleading’.
The FCA estimated 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 this method.