The U.K. Financial Services Authority has found weaknesses in annuity firms’ fair treatment of customers approaching retirement. An FSA review found that almost 40% of the firms studied did not meet its requirements for literature sent to customers. Among the problems found at some firms were failures to explain that exercising an open market option can lead to a higher pension and not making clear the value of seeking advice.
The FSA also found delays in 60% of annuity transfer cases it reviewed. Among these, 42% of cases included what the FSA called unacceptable delays caused by transferring pension funds not paying the OMO funds within 10 business days of receiving all the necessary documents.
FSA officials wrote that all firms involved in the study had been sent feedback. Spokesman Adam Richards-Gray told CR the handling of annuities is a visible element of the regulator’s Treating Customers Fairly initiative, which fully comes into effect in December. Failure to meet the requirements in this area alone may be enough for the FSA to bring action against a firm, he added.
“Poor communications from insurers may result in people making poor decisions or failing to take any action to maximize 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,” said Sarah Wilson, director of TCF and insurance sector leader at the FSA.