Media Pressure forces ABI to make more promises to treat customers better
Annuity Customers need action now – not waiting yet another year
Regulator needs to act quickly to ensure proper protection, not self-regulation
by Dr. Ros Altmann
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ABI has promised to treat annuity customers better for years – still not happening in too many cases: I’m pleased to see that the media pressure is helping the ABI to realise that it must ensure that its members improve the way annuities are sold. Despite years of promises and initiatives to raise standards, customers are all too often treated appallingly.
Basic suitability checks needed and selling annuities without customer response should be banned: Basic checks are not carried out to assess suitability, there is no control on value for money and no basic requirements to treat customers fairly. Indeed, annuity selling is the ‘wild west’ of the pension market. Whether it is insurers selling standard annuities to customers in poor health – because they do not even ask the most basic questions to check whether the annuity is suitable – or insurers buying poor value annuities by default for customers who have not responded to say they wish to, the market is simply not serving customers fairly in far too many instances.
Great that ABI wants £10,000 pots to be taken as cash: Although I’m delighted that the ABI is calling for funds worth less than £10,000 to be allowed not to annuitise, it is important that customers are told of this option. Currently, annuity brokers and providers do not make this clear.. Annuity rates for smaller funds are particularly poor and many people fail to achieve good value from their pension savings.
Annuities are unique – FCA must act to stop irreversible unsuitable selling: The Regulator needs to step in urgently to ensure companies do actually treat customers fairly. Annuities are a unique financial product and require special care when being sold. Ideally customers need advice before buying because many of those who buy can actually take the fund as cash but don’t know it.
Customers being short-changed day in, day out: So far the ABI has been too slow to implement proper change and customers are being short-changed day in and day out when they unwittingly buy the wrong annuity- often at very poor value – from ABI members who are failing their customers.
Conversation with in-house team is hardly impartial!: Offering them a conversation with an in-house team won’t be enough unless there are proper protections in place. Customers need unbiased effective communications, information and preferably advice, since they pay to buy their annuity whether they are properly advised or not.
Reforms needed now, not in 15 months’ time: I’m delighted that the ABI is making further concessions to try to improve customer outcomes, but there is a lot more that needs to be done to ensure this market works well. Since most annuities can never be changed, the reforms are needed immediately, not in 15 months’ time.
What should happen?
- Customers are not automatically offered an annuity
- Annuity companies must ensure products are suitable before being sold – basic suitability checks must be made
- Customers should be encouraged to take financial advice
- Brokers should not be permitted to charge high commissions, while IFAs who can offer the best protection to customers are forbidden to do so – no commission should be permitted on annuity sales. A fair fee, for a fair service
Dr. Ros Altmann