Consumer groups urge FCA to investigate direct annuity market

The Financial Conduct Authority (FCA) is being urged to name price comparison websites which breached its rules when selling annuities to customers moving into retirement.

The call, from consumer groups, comes after the FCA revealed that 12 out of 13 annuity websites reviewed in a recent probe fell short of requirements: to be “fair, clear and not misleading.”

The regulator launched a review of the websites in 2013 as growing numbers of people approaching retirement turned to comparison services to help them shop around for the best deal.

However, unlike many other products bought online, an annuity purchase is irreversible and consumers buying direct shoulder the responsibility for buying the right product.

One of the issues raised by the regulator was websites that described their services as “free” when in fact a commission payment would be deducted from the customer’s pension fund if they went on to buy an annuity.

Concerns were also raised about the lack of prominence of the weaker consumer protection inherent in buying without advice. Unlike buying through an advised service, consumers buying direct have limited recourse to the Financial Ombudsman Service if they later decide the product was unsuitable.

“All of the websites we reviewed raised concerns,” said the FCA. “Key information and risk warnings were often missing or insufficiently prominent. Importantly we also found that information on 12 of the 13 websites did not satisfy the key requirement to be ‘fair, clear and not misleading’.”

The FCA has written to the websites where concerns were found and has required to them to make changes, but consumer groups want the companies named.

Richard Lloyd, executive director of Which?, the consumer group, said: “We want the FCA to name the websites where it found misleading promotions and ensure that all comparison sites are upfront about costs and what services they offer.”

Martin Bown Financial Services provides independent advice on annuity purchase and retirement options and in many cases will charge less than a comparison web site.