Pensions specialist urges FCA enforcement on annuities
The Financial Conduct authority has been “unbelievably slow to act” on annuity market regulation and the Association of British Insurers cannot be trusted to clean its own house out, according to one pensions industry advice veteran.
David Trenner, technical director at retirement advisory specialists Intelligent Pensions, told FTAdviser that the ABI was not right to effectively self-regulate annuity provision, due to vested interests.
He added: “We have to move away from the idea that everybody can offer an annuity; some are good at pension savings, but not all are prepared for offering products into retirement.
“People clearly aren’t following the ABI’s code of conduct, so what’s the point in having it? It’s not like they take any action.”
He added that providers should be dissuaded from continuing to offer poor value annuities due to the FCA’s Treating Customers Fairly rules, but it will take some well-publicised enforcement action to stamp out all bad practice.
“There must be a better definition of ‘bad’ annuities and by that I mean those sold to people with small pots getting miserable rates and those with larger pots being defaulted into contracts paying well under the market average.”
Mr Trenner continued that while pensions minister Steve Webb was right to tell the presenter of a recent television documentarythat automatic defaulting into an annuity was not the norm, there are some old contracts written with a default position, many of which have become mixed in as insurers have consolidated over the years.
The regulator’s annuity market review, published in December, stopped short of demanding that new standards be applied retrospectively.
Mr Trenner said that it would be interesting to see what was revealed by the FCA’s look at the period since the FSA’s previous thematic work on open market options in 2008.
He also expressed concern that while Aviva recently came cleanand initiated a redress programme for around 250 customers who were sold a conventional annuities 2013 through a telephone sales process, providers which do not offer impaired life annuities are “getting away with it”.