Pensions

HM Treasury written question – answered at on 26 March 2015.

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Photo of Lord Myners Lord Myners Non-affiliated

To ask Her Majesty’s Government whether they have received indications of concern from the Financial Conduct Authority about the mis-selling of annuities as a result of failure to take into account health issues; and whether they have taken into account the same risk to those converting pension balances to a lump sum.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

In December 2014, the Financial Conduct Authority (FCA) published its thematic review on non-advised annuities sales. This found evidence that firms’ sales practices were contributing to consumers potentially buying the wrong annuity for their circumstances, particularly in not buying an enhanced (higher return) annuity when they may be eligible for one, for example if they have a medical condition.

The FCA is asking firms that participated in the review to conduct further work to determine whether its findings in relation to enhanced annuities are indicative of a widespread problem. The FCA will then review this additional evidence, and will consider what action to take.

The government’s new free and impartial pensions guidance service – Pension Wise – will encourage consumers seeking to take advantage of the new pensions freedoms to properly consider their health as part of their retirement income decision. The new pension flexibilities come into force on 6 April 2015, and the FCA has announced that, from that date, firms will have to provide retirement risk warnings to consumers at the point when they have decided they wish to take a specific action and access their defined contribution pension savings. For example, where a consumer says they would like to purchase an annuity and the provider identifies that the consumer has poor health, the provider should inform the consumer that they could be eligible for a better value annuity.

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