Ban providers from flogging annuities with poor rates, says pensions expert
Insurers offering annuities with poor rates should be banned from selling them, according to a pensions expert.
Intelligent Pensions technical director David Trenner has called for a ban in the company’s response to the Financial Conduct Authority (FCA) Retirement Income Market Study, which is looking at how to improve the retirement products market.
Trenner argued that insurers selling annuities that pay out an income of more than 5% below the best available rate on the Money Advice Service comparison website should be banned.
He also called for providers who do not offer impaired life or enhanced annuities, which offer increased income to those who are unwell due to medical of lifestyle reasons, should not be allowed to operate in the annuity market.
‘Giving people significantly less income than they could get elsewhere every year for the rest of their lives is simply not treating customers fairly, and it is easy for a provider to check if it is failing the 5% rule,’ said Trenner.
‘The financial decisions that those approaching retirement and at-retirement make are among the most important they ever will. But it can be a daunting and confusing time.’
Trenner added that while it was encouraging that the FCA acknowledge the problems in the market he was concerned that its rules would cause more confusion.
'The FCA wants transparency over the quotes consumers receive, matched against the open market,’ he said.
‘There is no doubt that consumers would benefit from this but there is a danger that too much information may confuse them and what is most important is a simple ‘call to action’ that encourages them to take the next step.
‘A much more radical approach might be to prevent providers selling ‘in-house’ annuities if their rate is more than 5% below the best available.’