FCA begins probe into providers’ annuity sales

It follows the FCA’s retirement income market study, which finished last December.

The review is only looking at non-advised sales by providers, the FCA said.

It is believed more than 600,000 pensioners could have been sold annuity contracts that failed to account for their health in the six-year period under review.

They may now be due compensation.

Common medical conditions such as diabetes and high blood pressure could have boosted payouts by 20% or more in many cases, it is believed, causing savers to miss out on tens of thousands pounds over the course of their retirements.

Compensation

The FCA will look at hundreds of annuity contracts issued by each product provider to see if savers were given a fair deal when they turned their pensions into a lifetime income.

Telephone conversations between firms and their customers and all paperwork sent to savers before they retired will come under scrutiny.

If the watchdog finds evidence that a pension provider failed to treat its customers fairly it will order the company to issue compensation.

Annuities were largely the only retirement product available to most savers until April this year, when George Osborne gave savers unlimited access to their retirement funds.

Research has suggested six in ten people should have qualified for so-called ‘enhanced’ annuities issued to those whose life expectancy is shorter due to smoking or ill health.

Such deals are typically worth between 20% and 40% more than standard annuities, boosting the annual payment from a £100,000 fund by as much as £2,400 a year for a 65-year-old.