A number of pension providers have been ordered to review their all their non-advised annuity sales since July 2008 after the Financial Conduct Authority found failings of “significant concern”.
This morning (14 October) the FCA has published its thematic review into non-advised annuity sales between May 2008 and April 2015.
While the regulator found no evidence of industry-wide or systemic failings, it did find consumers with some firms could be losing out because of the poor handling of telephone conversations.
This is likely to have led to some consumers buying a standard annuity when they would have been eligible for an enhanced one.
The report said: “These [failures] usually took place after the initial written wake-up packs were issued.
“Often, these conversations only reacted to customers’ questions and the firm took no steps to reiterate key messages about customers’ potential eligibility for enhanced annuities.
“In such cases, there was over-reliance on the messages given in the wake-up packs even though considerable time may have passed since they were received by the customer.”
The FCA found firms often failed to repeat key messages about enhanced annuities in one or more individual communications, either written or oral, throughout the sales process but in most cases firms provided enough information overall to allow the customer to make an informed choice.
But it said: “Nonetheless, this still suggests that all firms within our sample can improve elements of their sales processes and customer communications, especially when it comes to repeating key messages about enhanced annuities.”
Call handlers were sometimes heavily reliant on scripts, which meant they were often unable to respond to the clients’ needs or clarify areas of misunderstanding.
Where firms did not sell enhanced annuities, they did not always inform customers of this or may not even mention them at all when speaking to customers.
According to the FCA’s findings, between 39 per cent and 48 per cent of customers who bought a standard annuity from their current pension provider may have had qualifying health or lifestyle conditions which would have made them eligible for an enhanced annuity.
But it estimates that in fewer than half the sales where it found failings which changed customers’ behaviour to a less suitable course of action was there evidence they may have suffered actual financial loss.
The FCA review looked at more than 1,200 non-advised sales at seven firms, which between them account for around two-thirds of the annuity market.
Megan Butler, director of supervision for investment, wholesale and specialist at the FCA said: “Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement.
“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules.