Are there any more honest insurers out there?

They have been flung at investors for decades with scant regard for suitability.

Aviva, having checked through its annuity sales, found 250 cases in which investors should have been offered an enhanced annuity.

Though small-scale, the implications are much wider.

Being Aviva it had the records, did the checks and put things right. Investors have received an average £500 back payment and will be an average £10 a month better off.

That is Aviva – a company which values its reputation.

So what is the rest of the industry doing? I cannot for one second believe that it is the only insurer which failed to ask the right questions about health and lifestyle or failed to frame them in the right way.

I cannot believe that Aviva is the only insurer which failed to ask the right questions about health and lifestyle

Aviva decided it had not been ‘treating customers fairly’. Remember that? It is a central tenet of financial regulation, but it often seems to be forgotten in the rush to maximise returns for shareholders or executive bonuses.

Search back into financial rules and regulations and you will find the open market option wandered into legislation in 1975 as part of the Finance Act.

Almost four decades, later just a third of customers use it. But how many millions have not even been told about it over those 39 years?

Then there is the question of advisers who have picked up a commission cheque for doing nothing because they sold a pension in the year dot, and 30 years later the investor has simply been given the off-the-shelf annuity.

The reason the financial services industry clung to annuities for so long was that they were weighed so heavily in their favour. Charges were obscure and profits high.

But that is all the more reason why investors should have been directed towards the correct product. And if the insurer did not offer an enhanced annuity, investors should have been told they were available elsewhere.

So who is going to be the next to own up? Are there any more honest insurers out there?

People trusted their savings to these firms over a long period and they had a right to expect to be directed towards the best product from the restricted annuity field when they retired.

Will the industry put this issue right on its own? Or must we once again endure the excruciating spectacle of watching the regulator force companies to treat their customers, both past and present, fairly?

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A fork in the road

There’s an opportunity for financial services providers to get ahead of the game right now.

When the new freedoms come in next year, firms have two very clear paths. The first is to make drawing cash cheap and simple. This would be the ‘using your pension like a cash machine’ option.

The second would be to make it expensive and complex.

I have no doubt both paths will become clearer in the months ahead. The temptation to milk a bit of extra cash from pensioners will be too much for some to resist.

They will invent charges for moving funds into a drawdown option, administering funds, drawing cash, changing the amount taken and changing the frequency.

But I have hopes that others are already looking at how to make the new regime easy and low-cost.

Nobody expects work to be done for nothing. But the days of making easy money from investors are numbered.

Politicians from most of the major parties already appear to be looking at this issue.

So it would be nice to think that for once the industry could avoid the need for regulation by setting fees at a level everybody considers to be reasonable.

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Common sense outbreak shock

While I am on the subject of common sense approaches, the government has altered a clause in the Pensions Bill which could have triggered £300 HMRC fines to people who had lost track of old pensions.

A pensioners taking cash from his pension for the first time would have been expected to track down all his other pension pots and inform the firms within 31 days.

An initial £300 fine could have increased by £30 a day with a maximum £3,000 had HMRC decided a pensioner had been negligent or fraudulent.

Now instead it will only have to notify pensions they currently save into – within 91 days.

The reason for the notification is to make sure pensioners cannot misuse tax breaks.

The changes should save a lot of people a lot of trouble with HMRC.

Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted at t.hazell@gmail.com