This section of the website is to inform you of the problem of Annuity Mis-selling and what you can do about it. We will explain the process for making a complaint yourself as well as seeking professional advice.

Pensions Firms obligations

When you are saving for retirement with a pensions company, you will save money every month and this money is invested/held as cash, depending upon your circumstances and attitude to risk. When you finally hit your retirement date you will be left with a ‘Pension Pot’. As of recent times, this pension pot is then exchanged for an annuity. An annuity is an insurance contract that pays you an annual income until you die. There are many types of annuity, which can affect the level of income you receive, but in general, you exchange this money for a long term income. Pension forms have an obligation to treat you fairly and to advise you appropriately when dealing with your pension pot and annuity. Many commentators have voiced concerns over many years reading this problem and the regulator has taken a closer look since 2014.

In December 2014, the Financial Conduct Authority conducted a Thematic Review of Annuity Sales Practices. If you would like to read this document, it can be found here The FCA reviewed Annuity Sales Practices following a concern raised on a previous review (February 2014.)

In a nutshell, the concern the FCA had was:

“Many customers are buying an annuity from their existing pensions provider and as a result, are missing out on a potentially higher income”

The report also found that 60% of customers were not switching provider and that;

“80% of these customers could have got a higher income on the open market”

For enhanced annuities, the report also found that:

“91% of these customers could have got a better deal on the open market”

What did the FCA find?

1. The report found evidence indicating that firms’ practices are contributing to their customers not shopping around (and not switching).
2. Customers were potentially purchasing the wrong type of annuity
3. A particular concern was people not purchasing an enhanced annuity, where they would have been eligible to do so and missing out on a higher retirement income as a consequence.

In all the circumstances above this is classed as ‘annuity mis-selling.

What happens next?

The FCA has asked firms to review their findings in relation to enhanced annuities and to ascertain whether or not this is indicative of a more widespread problem. The firms have been asked to gather statistics and more evidence and not to review all past sales. The key area of the review, will determine whether customers with certain medical conditions or lifestyle factors missed out on a higher retirement income by:

* purchasing a standard annuity (rather than an enhanced annuity)
* not shopping around for an enhanced annuity and as a result, they purchased an enhanced annuity from their existing pensions provider, rather than on the open market.

The Media

The Daily Telegraph on the 13th March 2015 delivered the headline:

Mis-sold annuities: savers to get thousands in official compensation plan

The article talks about an industry wide problem and that the FCA is working with providers to create a redress programme where up to 600,000 people could win payouts. At the end of the article a spokesman for the FCA said:
“Our work has not found evidence of widespread mis-selling and we do not currently have any plans in place for an industry-wide redress scheme.”
I suppose time will tell. What is likely, is that the FCA will not want a repeat of the PPI Claims industry with regards to a free for all. The FCA will prefer that redress schemes are done behind closed doors with the effected people written to and compensation awarded accordingly. This does not stop people from taking the initiative and submitting claims before the probable storm. These sagas usually take years to clear up.