FSA highlights failings on annuity literature

The FSA has found a number of annuity providers’ product literature fails to meet minimum standards.

A recent review by the regulator also found delays in over 60% of annuity transfer cases, which were put down to complexity of process and confusion caused by the diversity of forms used to complete transfers.

The FSA said it would be working with the ABI and the wider industry to reform the overall annuity transfer process, hoping to achieve standardisation and rationalisation of the systems and documents involved in the transfer process.

Of the review of 55 annuity providers, the FSA found more than 60% provided clear information to pension customers approaching retirement age, including the option to shop around for an annuity, or the open market option.

But it said a “significant minority” provided material that failed to meet regulatory requirements.

The review links to the FSA’s wider work on TCF and the findings reveals many pension firms must improve their literature and processes by the December TCF deadline.

FSA director of TCF and insurance sector leader Sarah Wilson said: “The decision on whether to buy an annuity from a current provider or to switch to another insurer on the open market can influence an individual’s lifetime income.

“Poor communications from insurers may result in people making poor decisions or failing to take any action to maximise their retirement income. At the same time, if a consumer decides to exercise the open market option, they can suffer if fund transfer does not happen in a timely manner.”