Insurers let off the hook over annuity mis-selling
Earlier this year the insurance industry was hauled over hot coals after the City watchdog found widespread mis-selling of annuities but why has it failed to follow up with immediate action continuing to leave pensioners at risk?
In February the Financial Conduct Authority (FCA) found in 80% of annuity sales, the consumer could have received a better deal by shopping around and not just buying an annuity from their pension provider. The FCA pulled no punches and we all thought it was making good on its promise to be tougher on the industry but after a follow-up report only one thing is clear: the insurance industry is still calling the shots.
The FCA has adjusted its tone and said that annuities are still good value for some and that further work needs to be done on 'enhanced annuities' where pensioners are at most risk of losing out. Another review was not what pensioners need, especially those who are planning to buy an annuity soon.
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The insurance lobby is a strong voice and it is showing that it is still a match for the regulator, even one that has promised to take a tougher stance. The widespread mis-selling has already been identified and the FCA is now dragging its feet in actually bringing in protection for pensioners.
Pensioners need to be forced to shop around for the best annuity because it's obvious from the FCA's report that insurers aren't going to encourage them.
In the dark
The FCA's insistence on conducting another report has come in the same week that rumours are whirling around about the Competition and Market Authority (CMA) review into workplace pension charges. It is expected to publish the results of the review but instead of naming and shaming the insurers who are charging rip-off charges on workplace pension schemes, the report will be generic.
Insurers will be given the names of customers where the CMA is unhappy with the charges but the customers will not be contacted, keeping everyone in the dark.
For all the talk of transparency and increasing trust in the financial services industry, the regulators aren't doing a good job of actually putting that into practice.
These reports are whitewashing the problems that are inherent and deeply ingrained in the insurance industry and without facing those problems, consumer trust will never be gained.
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