National IFA and employee benefits consultancy LEBC Group has claimed the annuity mis-selling could become an “even bigger mis-selling scandal” than payment protection insurance, which is set to cost banks upwards of £20bn.
Nick Flynn, divisional director at LEBC, sounded the warning in a press release offering its services to help pension providers review past annuity sales to existing customers, warning that if they do not step up then the industry could face another major mis-selling scandal.
He said there is a danger that annuity mis-selling could become an “even bigger mis-selling scandal” than PPI and would involve considerably significant financial consequences as well as putting the industry’s delicate reputation at severe risk once again.
Mr Flynn’s remarks, while unashamedly promotional, echoed those of pensions expert Ros Altmann, who was previously quoted as saying annuities mis-selling could be “possibly the worst mis-selling scandal ever seen in Britain”.
Ms Altmann was talking to the Telegraph after Aviva became the first firm to offer redress for specific mis-selling to customers through a now closed telesales operation, which the paper had speculated could open the door for claims from hundreds of thousands of legacy customers.
It quoted figures from an FCA report which indicated in 2013 more than 110,000 people, from a total market of 420,000 sales worth £12bn, bought conventional annuities who could have qualified for an enhancement. Of course, qualifying and not buying does not necessarily equate to ‘mis-selling’.
Before Christmas the Financial Conduct Authority published its annuity market review asking some pension providers to do further work in determining if the findings in relation to enhanced annuities are indicative of a more widespread problem.
The FCA’s annuities review was critical of the lack of enhanced annuity sales and blamed providers’ sales practices as one reason why people are failing to use the open market option.
Enhanced annuity providers were quick to point the blame at life company providers for some poor customer outcomes, and accused them of simply rolling customers into their own annuity products.
Mr Flynn previously stated that the results came five to six years too late as problems and issues have continuously been highlighted.
“Pension providers will now be very worried as the consequences for them could be considerable,” he added.
Additional reporting by Ashley Wassall