Consumer protection matters no matter how small the market
Only a few weeks ago, it came to light that the Financial Conduct Authority (FCA) had found that unscrupulous providers were not informing customers of their fundamental right to shop on the open market, nor that they may qualify for enhanced rates.
Now, news is out that The Association of British Insurers (ABI) has stopped publishing its quarterly tracking report, designed to help consumers secure a better annuity rate on the open market. By showing all annuity rates on offer, it enabled customers to see how their provider’s rates compared with the wider market.
Yes, annuity sales may have curtailed sharply due to the introduction of pension freedoms but this is no excuse for our sector to relax its grip on doing what’s right for consumers.
Fintech provider, Origo, reports that pension-to-annuity transfers have dropped by 77 per cent since April last year. However, as the Citizen Advice Bureau suggests, 80,000 people a year are still choosing to buy annuities, so for these 80,000 people, protection matters. After all, around 80% of them will secure 6.8% more pension income if they exercise their open market options.
Consumer rights are not fair weather friends. They are hard fought for and come into existence as a result of disputes. Our rights must be respected regardless of the size of the market they are designed to protect. As spokesbody for UK insurers, how can the ABI possibly justify that there are now insufficient numbers of people purchasing annuities to warrant the work that goes into its report? This projects the message that annuitants do not matter as much as they once did. This attitude is hardly likely to deter providers from becoming lax about telling customers what they need to know to secure the best pension income.
A recent open letter by a financial services firm to the ABI calls for the revival of the annuity report. It lists several providers, all household names, who, regrettably, tie their customers to their own annuity products, without informing their customers that they actually have a right to shop around elsewhere for a more competitive annuity. Again, what message does this convey?
These unattractive developments are counter-intuitive to the spirit of pension freedoms. Like them or not, annuities still have a place in the pensions landscape. So long as they are sold, buyers of annuities must continue to be protected as vehemently as they once were. The ABI must step up to its responsibility.