The Association of British Insurers (ABI) has been urged by Hargreaves Lansdown to revive its quarterly publication of annuity rates to avoid another mis-selling scandal.
In a strongly worded letter to the ABI, Tom McPhail, head of retirement policy for Hargreaves Lansdown, has said that if the ABI does not respond on behalf of the industry then he would like to see the FCA take regulatory action.
He cites FCA research which found 80 per cent of annuity purchasers could get a better deal by shopping around - the average uplift in income was 6.8 percent.
He also cites Citizen Advice Bureau research that shows fewer investors are shopping around but that 80,000 people a year are still buying an annuity.
“The ABI introduced annuity rate tracking because of concerns about market competition, they then quietly dropped it after pension freedom, arguing most investors weren’t buying an annuity any more," said McPhail.
"Unless decisive action is taken quickly, in a few years’ time insurance companies are going to be looking back at another mis-selling scandal, wondering how it all went wrong yet again.”
In the letter to the ABI, McPhail has called for all providers, especially those which no longer compete on the open market, to be required to participate in the quarterly tracking and publication of insurance company annuity rates, the so-called ‘annuity window’.
ABI’s director of policy, long-term savings and protection, Yvonne Braun, said in a statement: "The annuity window was designed for a world in which buying an annuity was compulsory for all but the most wealthy. This is no longer the case.
"Pension freedoms have broadened choice for consumers who now have a wide range of options when it comes to how they invest their retirement savings.
"This has fundamentally altered the market and has made annuity comparisons much less relevant. In addition, half of the people who decide to stay with their existing pension provider have a guaranteed annuity rate, so comparisons are of very limited value to them.
"Finally, one of the limitations of the ABI publishing annuity rates was that these did not reflect commission, which can vary significantly between different brokers, as Hargreaves Lansdown will know."
Hargreaves Lansdown lists the providers that have opted out of the open market and the dates they opted out as follows:
Reliance Mutual (July 2014), Friends Life, merger with Aviva (April 2015), Partnership Assurance, merger with Just Retirement (April 2016), Prudential, still offer in-house annuities (June 2016), Aegon, in-house annuities through L&G as ‘preferred annuity supplier’ (September 2016) and Standard Life, still offer in-house annuities (November 2016).
Hargreaves Lansdown offers its own whole of market annuity service through which eight providers participate. Aviva (standard and enhanced), Canada Life (standard and enhanced), Hodge Lifetime (standard), Just Retirement (enhanced), Legal & General (standard and enhanced), LV= (enhanced), Retirement Advantage (standard and enhanced), Scottish Widows (enhanced)