Annuity Misselling Pay Outs Due For Thousands

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Thousands of pensions missold annuities are due compensation following an investigation by financial watchdogs.

The Financial Conduct Authority has identified at least 90,000 cases of pensioners in poor health who were sold annuities that pay too little.

They should have been sold enhanced annuities that gave them extra retirement income because their bad health reduced life expectancy.

The FCA calculated the average loss as between £120 and £240 a year for each pensioner.

The misselling dates back until July 2008, so many pay outs could add up to around £2,000.

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Future pay outs also need adjusting to make up for the shortfall.

Right information

The inquiry revealed that almost all the misselling cases were agreed over the telephone between providers and pensioners.

In each case, the adviser failed to explain to customers that they could qualify for a higher annuity payment if they had problems induced by their lifestyle or health.

The FCA made clear that no evidence of an industry-wide advice failure was uncovered and that the problem was confined to a handful of firms who cover two thirds of the annuity market.

Megan Butler, who led the investigation, 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.

£20m compensation

“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.”

Trade body for annuity providers, the Association of British Insurers, commented that misselling was limited to a few companies and that firms are working hard to improve information offered by advisers.

The FCA report criticised firms for tying advisers to call scripts, not telling customers they could shop around for higher rates and some companies that did not sell enhanced annuities failed to inform customers about the option that could be available elsewhere.

Annuity providers will now contact customers with details of missold annuities and offer compensation, which could cost financial firms up to £20 million.

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