Industry experts are queuing up to highlight the shortcomings of the Financial Conduct Authority in its belated "crackdown" on the sale of annuities.
Six years after the former Financial services Authority reported on how people were missing out by not shopping around for the best retirement income, the new FCA came to the same conclusion this week, and identified "sales practices" as one of the problems - without proposing any immediate reforms.
Nick Flynn, at retirement adviser LEBC, said the report was " five to six years too late as problems and issues have continuously been highlighted".
Dr Ros Altmann, the government's retirement tsar, said: " It is truly shocking that the FCA's review uncovers what seems clear evidence of frequent mis-selling, yet is not proposing immediate action to stop it happening any more.
"Call centres were not explaining properly about how to benefit from better rates if you had health issues or how much annuity rates can vary if you shop around. This is surely mis-selling, yet there seem to be no proposals for compensation."
Dr Altmann said the FCA had merely asked insurers to look back at a sample of their sales since 2008 to check if people with health issues might have been sold the wrong type of annuity. "It is blindingly obvious that there is a widespread problem, and action is required immediately to stop these inappropriate sales happening in future, not just looking at the past. Indeed, we do not know how long this inquiry by insurers will take, nor how the firms will assess their customers' health."
Alan Higham, Retirement Director at Fidelity Worldwide Investment, said
the FCA had "failed to draw any conclusions" on the fact that regulations still permit commission to be paid without customer consent on retirement income products "and this, therefore, distorts what and how customers buy at retirement".
He concluded: "It is clear that there has been a prolonged market failure even though the area is heavily regulated. Given the changes to retirement income provision which will arrive next year...a full-scale review of the provision of all retirement income, guidance and advice is needed urgently."
Andrew Tully, pensions technical director at at MGM Advantage, said: "The FCA evidence shows annuities have provided good value when people have used the open market to shop around, and are receiving a higher income through enhanced annuities, which take into account health and lifestyle. Unfortunately the vast majority of people buying from their holding pension provider do not benefit from these higher rates, and there is typically a 30per cent gap between standard and enhanced annuity rates. Given up to 60per cent of people can benefit from a higher income from an enhanced annuity, this affects a huge number of retirees and equates to a significant difference in income over a typical retirement."
Mr Tully added: 'My fear is we will look back on these pension reforms in years to come and see that the fundamental problems that exist have not been adequately addressed. People who seek professional financial advice are likely to continue to have the best outcomes at retirement
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article