Consumers being let down by pension providers

Many pension providers are not offering the best service for their customers, claims the Financial Conduct Authority (FCA).

In a review of the pensions market, the regulator concluded that many consumers are failing to receive a higher income because they are not made aware there are alternative options.

In many cases people taking out annuities are not being told about more suitable policies, especially for those who may have a shorter life expectancy or have key medical issues.

Following the examination of the market, the FCA is now calling for all pension providers to be required to tell potential customers how their product compares with others available from other companies.

“We want the industry to play its part; we want to clean up how people are presented with their options,” Christopher Woolard, the FCA’s director of policy, risk and research told the BBC.

However, the industry stressed shopping around for the best deal was already an important issue and providers should ensure they inform customers.

“Providers recognise that in the new pensions world of greater choice, more needs to be done to ensure good outcomes for customers,” said Otto Thoresen, the director general of the Association of British Insurers (ABI).

Since the recent government decision to allow people more flexible access to their pensions, there has been a decline in annuity sales, as consumers opt for income drawdown instead.

However, the FCA stressed that annuities still represent good value for some, especially for those looking for relatively low-risk options.

The regulator will now consult with the industry and assess if legal action is required.

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