MSE News: FSA to probe annuities market 'failure'

Former_MSE_Jamie
Former_MSE_Jamie Posts: 98 Forumite
"The financial regulator is launching a review into whether people who are retiring are getting a "fair deal"..."
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FSA to probe annuities market 'failure'

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  • dunstonh
    dunstonh Posts: 116,342 Forumite
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    It isnt a market failure. It is a consumer failure.

    As an IFA I personally benefit when someone uses me to look at the open market option. I see the documentation fund providers and they all say mention the open market option. Some even go as far to say the terms could well be better. Indeed, here is some text from one of the bigger pension providers

    "Not every pension company uses the same rates to calculate your income or provides the same choice of annuity products. This means that depending on your age and personal circumstances, another company may be better suited to your needs. For example, a company offering higher annuity rates at the time of retirement could provide you with a higher pension."

    It also goes on to say that if you have health problems or a smoker that enhanced or impaired annuities are available and that they dont offer them and tells them they can check the moneyadvice service for information or by using the open market option by an adviser.

    If people are reading these things and still buying from the provider then you are really stuck on what you can do.

    I suspect many people just go for the easy option out of laziness.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    Probably ignorance rather than laziness to be fair but valid points
    dunstonh.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Two of my wife's pension companies have written to her this week. Both pointed out the open market option: to choose it, all she had to do was tick a box.
    Free the dunston one next time too.
  • dunstonh wrote: »
    It isnt a market failure. It is a consumer failure.

    Consumers need protection, many arrive at this point and just don't know the options and are confused by the bumf. As they point out in the article it is a very important decision.

    I don't believe we should let the less able members of society who are less likely to do the extra work to get the better deal and who need the best advice the most to be channeled into these bad decisions!

    In my world there is such a thing as society.
  • Is there a failure?

    You can invest in stocks and shares isa's, cash isa, premium bonds etc. You can keep control. Once the tax free lump sums gone, nest is place, you will soon see the final salary schemes in the public sector come under increasing pressure. Shame really, pensions make sense but are being slowly ruined.
  • Linton
    Linton Posts: 17,154 Forumite
    Name Dropper First Post First Anniversary Hung up my suit!

    I don't believe we should let the less able members of society who are less likely to do the extra work to get the better deal and who need the best advice the most to be channeled into these bad decisions!

    How? Its the same with everything, people who shop around get the best deal, or rather the deal most appropriate to them. Think of used cars, insurance, vegetables etc etc.You cant do much more really than educate people that they can shop around, but some people wont be educated. We try on this forum, but its only the people with some understanding who would even think of raising questions here.

    Really when buying annuities people need professional advice. This is available from IFAs, but I dont see how it can be economic to provide advice to the majority of people who only have small pensions. Setting up voluntary advice is fraught with danger if there is no mechanism to ensure liabillity and thus protection from serious errors..
  • atush
    atush Posts: 18,726 Forumite
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    There is a failure, but don't see that it is in the FSA remit.

    The failure is in Quantative easing.

    Seems to be a pointless waste of money on lining the FSA employee pockets. I am sure there is something else they could investigate more fruitfully.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Financial advisor firm Hargreaves Lansdown says only 40% of people actually use the open market option, adding this is a "market failure".

    Perhaps an ad for HL in the article.........

    This is an "owned" site now.
  • GhIFA
    GhIFA Posts: 619 Forumite
    Thrugelmir wrote: »
    Perhaps an ad for HL in the article.........

    This is an "owned" site now.

    To be fair, they seem to be the "go-to" point whenever a quote is needed in the mainstream media - you can almost guarantee that whenever the press run a pension story there will be a soundbite from HL in there!
    I am an IFA. Any comments made on this forum are provided for information only and should not be construed as advice. Should you need advice on a specific area then please consult a local IFA.
  • dunstonh
    dunstonh Posts: 116,342 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Thrugelmir wrote: »
    Perhaps an ad for HL in the article.........

    This is an "owned" site now.

    I had a client in December that got an OMO quote from HL. I was able to come in with better terms using the same insurer on the same basis. So, if HL are being moral on this, surely they should warn their customers that IFAs can offer higher annuity rates than them. After all, that is what they are saying the existing providers should do. ;)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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