Annuity sale mis-selling probe could net pensioners compensation

The Financial Conduct Authority (FCA) says around 90,000 pensioners may be in line for compensation over mis-selling concerns.

It said that while its review of non-advised annuities had not uncovered poor practices in written communication, it was worried about phone contact with customers at a small number of firms.

Annuities can be purchased by those of pension age in order to guarantee a fixed income per year, often for the rest of their lives.

But the system has been criticised by some who argue that many pensioners fail to realise that they can shop around to secure the best deal for their needs.

The ongoing FCA probe looked at more than 1,200 non-advised sales at firms which between them account for around two-thirds of the annuity market.

It has raised concerns that phone sales teams at some companies may have been selling annuities in a way that caused customers to buy a standard annuity, despite being eligible for a better deal.

Highlighted problems include call handlers relying too much on a set script, failing to inform customers that they could be eligible for a better deal elsewhere, or underplaying the increased payments a customer could secure should they shop around.

The FCA estimates that around 90,000 customers could be affected, with compensation payments likely to settle at between £120 and £240 per year.

It has ordered all affected firms to review sales made as far back as July 2008 and provide redress where appropriate.

The news comes just a day after an interim report was published by John Cridland, who is carrying out a government-commissioned review into the pensions system.

Megan Butler, director of supervision at the FCA, 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.

"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."