The FCA wanted to establish whether firms provided customers with sufficient information about enhanced annuities. The FCA looked at whether firms made customers aware of their potential eligibility for enhanced annuities and whether they encouraged them to shop around in order to potentially get a higher income from another provider.
The FCA found 'no evidence of an industry-wide or systemic failure' to provide customers with sufficient information about enhanced annuities through non-advised sales. The FCA found many of the firms provided clear and comprehensive information to customers with written communication tending to meet the standards required.
At a small number of firms the FCA did have concerns when significant communications took place orally – normally over the phone – which was likely to have caused some customers to purchase a standard annuity when they may have been eligible for an enhanced product.
These failings were of sufficient concern at a small number of firms that they are now being asked by the FCA to review all non-advised sales from July 20081 and, where appropriate, provide redress; these firms are also being investigated by the FCA’s Enforcement Division to determine whether further action is necessary.
Megan Butler, director of supervision – investment, wholesale and specialist at the FCA said:
“Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement.
“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules. Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements.”
Tom McPhail, Head of retirement policy at Hargreaves Lansdown, said:
“The FCA’s review has given the non-advised annuity sector a reasonably clean bill of health however they also found some failings which for a minority of customers may eventually lead to their getting some compensation. They also found that even where insurance companies follow the letter of the regulations, they still don’t always communicate effectively with their customers.
