MSE News: Annuity sales practices failing pensioners, says FCA

jamesd

gadgetmind wrote: »

I bought an Audi A8. The Audi dealer didn't tell me that other manufacturers made cars, or that there were Audi models perhaps more suited to my needs, and far cheaper, than the one that I bought.

Sheesh!

Did the sales person tell you that the car was perfectly suited for your physical limitations because it had x, y and z features that it turned out not to have after all? Think you might want your money back when you discovered you'd been lied to?

kidmugsy

jamesd wrote: »

Did the sales person tell you that the car was perfectly suited for your physical limitations because it had x, y and z features that it turned out not to have after all? Think you might want your money back when you discovered you'd been lied to?

But surely lying is fraud and should be pursued in the criminal courts? Compensation isn't punishment enough.

However, no doubt dozy customers can once again hope to be subsidised at someone else's expense

jamesd

Did you read much of the report? Things like firms ignoring medical information given for purchase of an enhanced annuity but not telling the customer that an adjustment for that that medical information was not present in the quote provided? I'm sure that firms will try to get around it but that seems to me to be outright deception.

Courts are usable but the FOS and FCA are usually a better way to go, particularly when the FCA can order firms to check past work and contact customers proactively so that all affected customers might be reached instead of just some. And the FCA is doing more FCA-supervised investigation.

It's well worth having a look at some of the poor practices examples given from page 33 onwards of the report. It's not all bad, the firm that really did well in informing customers that the enhanced annuity products it didn't sell might be better if there was a medical condition or other reason for reduced life expectancy.

redux

Based on a recent statement of fund value, with sample unnamed annuity forecast on some pages at the back, I just assume that there must be better options.

I don't need to know just yet, but I'm amazed anyone would buy an annuity with such low yields, not much above a long-dated gilt, begging questions about the rate of return of capital.

gadgetmind wrote: »

I bought an Audi A8. The Audi dealer didn't tell me that other manufacturers made cars, or that there were Audi models perhaps more suited to my needs, and far cheaper, than the one that I bought.

Sheesh!

Would a secondhand car have been a better option, or could you even manage without? Public transport, occasional car hire?

About twenty years ago I looked at insurance company pensions and wished that there could be other options, specifically maybe investment trusts. The first ones appeared only a few months later.

Fortunately for me the Equitable Life salesman at that time had treated me like an idiot for asking what turned out later to be highly pertinent questions about annuities.

I started hoping that one day there would be other ways to draw on a scheme than buying an annuity ...

gadgetmind

jamesd wrote: »

Did the sales person tell you that the car was perfectly suited for your physical limitations

No, I'd expect to check that for myself.

gadgetmind

redux wrote: »

Would a secondhand car have been a better option, or could you even manage without? Public transport, occasional car hire?

Would you expect a car salesman to suggest these options?

Would you expect a company selling annuities to suggest anything other than buying an annuity from them?

I'd like to think that neither the car salesman nor the annuity company would engage in outright deception, but I'd certainly expect to be told only what they wanted me to hear, and to have to do my own research.

Linton

redux wrote: »

...
I don't need to know just yet, but I'm amazed anyone would buy an annuity with such low yields, not much above a long-dated gilt, begging questions about the rate of return of capital.
...

The whole point about an annuity is that it guarantees a given return no matter what happens to the market or to your life span. It is basically an insurance against living too long. Those who die early pay for those who die late. Annuity rates must be tied to gilt rates because gilts are the only way of providing an absolute guarantee, or at least as absolute as it is possible to get.

You can get much better returns but the higher the return the greater the risk of running out of money before you die. In my view sensible retirement planning implies at least sufficient absolutely guaranteed income to ensure that you can live what you consider to be a basic existence.

redux

gadgetmind wrote: »

Would you expect a car salesman to suggest these options?

Would you expect a company selling annuities to suggest anything other than buying an annuity from them?

I'd like to think that neither the car salesman nor the annuity company would engage in outright deception, but I'd certainly expect to be told only what they wanted me to hear, and to have to do my own research.

We agree, and that's what I did.

Going back those years, I don't think the Eq Life salesman was dishonest. Either he didn't understand the premises behind my question or he assumed neither he nor I should worry about that stuff.

jamesd

gadgetmind wrote: »

No, I'd expect to check that for myself.

"because it had x, y and z features that it turned out not to have after all"? In an enhanced annuity the purchaser doesn't know if a particular item is present in the quote unless they are told by the annuity provider, so the annuity provider is able to hide the fact that something isn't present.

jamesd

gadgetmind wrote: »

I'd like to think that neither the car salesman nor the annuity company would engage in outright deception, but I'd certainly expect to be told only what they wanted me to hear, and to have to do my own research.

The annuity selling firm doesn't get that choice. The "ABI's compulsory code on retirement choices" applies if the sale was by one of their members. If a vendor breached the code, the consumer can end up entitled to redress if they suffered a financial loss.

So an MSE article onannuity compensation claiming can start out with simple things like:

1. Do you have any reason to believe that you have a lower life expectancy than usual? Have you ever been a smoker or do you have any of this list of conditions that can affect life expectancy?
1a. Did the annuity vendor ask you about your health? If not, you should submit a complaint that they breached the ABI code and should have asked about your health and informed you about an enhanced annuity, even if they don't sell them themselves.

1b. After the annuity provider was told about your health conditions and gave you a quote did they tell you that the quote included allowances for all of those conditions? It not, you can ask them to tell you which conditions were included because some annuity firms did not include conditions that other firms did include and failed to tell customers about this. If your condition was not included by them but is included by others you can seek redress for the difference in payments.

2. Did you want a lower initial income that would increase with inflation? Did the annuity provider offer this option to you? If not, you should submit a complaint that they did not inform you about the options available and if you had been informed, you would not have bought the annuity that you were sold.

3. Did you want a higher initial income that would not increase with inflation? Did the annuity provider offer this option to you? If not, you should submit a complaint that they did not inform you about the options available and if you had been informed, you would not have bought the annuity that you were sold.

4. Were you told that you had to buy an annuity to get a 25% tax free lump sum? If not, or if the annuity provider told you that this was not possible, you can submit a complaint that you were not told about the available options and were misled by not being informed about income drawdown, something they were required to tell yo about even if they didn't offer the option. You could seek reversal of the annuity sale, with a refund of all but the income paid to you already.

And so on, working through the required elements of the Code.