Best Practise is the only way forward
It is dismal news that the FCA’s enforcement team has decided to extend its investigation of annuity providers because its research has revealed that some providers are failing to provide their clients with information which will help them secure more income in retirement.
The FCA has found that a number of providers are not informing their customers that they may qualify for enhanced annuities or that they can shop around for more competitive annuity rates.
Although this seems not to be a systemic failure of communication, it, nonetheless, needs to be stamped out fast. Nothing must jeopardise the immensely positive strides the financial services sector is making to ensure that savers and investors receive a service that is nothing short of best practise.
It is also essential to remember that despite the recent pension freedoms, the annuity still has its fans and rules need to be adhered to as strictly as ever. For over 30 years now, the vigilantes in our sector have helped annuitants by campaigning for clear communication of the existence of the Open Market Option.
These unsung heroes fought hard to make it compulsory for annuity providers to inform customers of their absolute entitlement to shop around for more competitive annuity rates.
This was no easy task. After all, the very process of shopping around is likely to result in a customer switching from an existing provider to one offering a more compelling rate.
It is outrageous that careless (or perhaps, unscrupulous) companies should now risk undoing any of the good work achieved by the financial planning community.
The background to this case is that the recently regulator reviewed non-advised sales activity in the UK’s largest annuity providers. In conversations with their customers, some providers did not mention enhanced annuities. Some did not even inform customers that they might secure a higher retirement income by shopping around.
Where there was mention of enhanced annuities, call-handlers mitigated how much more income the customer might receive by shopping around. The FCA is, therefore, concerned that customers who were in fact eligible for enhanced rates, only purchased standard annuities.
It seems the problem lies with relatively few firms and all going well, further investigation will reveal no more issues. However, I firmly believe the guilty firms should be brought to task. As a collective, we are working extraordinarily hard to look after our clients and to build an excellent reputation. There should be zero-tolerance of any deliberate or careless action taken by any firm which puts this hard-earned reputation at risk.