Pension Savers Could Be Due Compensation

Pension savers sold annuities could be due thousands of pounds in compensation following a report by the financial watchdog.

The Financial Conduct Authority said that insurers were maximising profits, failing to give customers the best deal and that the annuity market was disorderly.

The companies will have to follow stricter rules on how they sell annuity pensions to make sure people get the best deal in retirement following a study by the FCA into the retirement income market.

It said the study confirmed that competition is not working as well as it could for consumers and many are missing out on a higher income by not shopping around for their annuities.

Annuities are a one-off purchase that people make when they retire.

They are used to convert their pension savings pot into a fixed annual income for the rest of the holder's life.

The regulator is recommending that insurers make it clear to customers how their quote compares with rivals.

Earlier this year it found that those buying a standard annuity could have boosted their annual income by as much as £200 by shopping around.

The watchdog added that on average, those buying annuities were missing out by £67.

It said that buyers of enhanced annuities could have been £290 better off or increased their annual income by £135.

A variety of annuity types exist, including standard ones that most people tend to get and enhanced annuities, where people in ill health, such as smokers, can get higher payments.

Smokers can get around a fifth bigger payout as their life expectancies are expected to be shorter.

The annuity market has come under stress since the financial crisis when governments began to increase liquidity - known as quantitative easing - by pumping billions into the market.