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16 Dec 2013

FSCP Report Highlights Bad Practices In UK Annuity Market

The Financial Services Consumer Panel (FSCP) has released a new report in which it criticises some British pension providers and insurance companies for the service they provide to customers.

When employees retire, they can use the money accumulated in their pension pot to buy an annuity, which secures them retirement income for the rest of their life. About 400,000 annuities are sold annually in the UK and sales are expected to rise dramatically over the next few years, the FSCP explained.

The panel, which works together with the Financial Conduct Authority (FCA), stated that there are insurance companies that make excessive profits at the expense of British pensioners. The report claimed that certain companies confuse pensioners with the annuities they buy and make it practically impossible for them to know whether they are getting a good deal.

There are providers that act in consumers´ best interest, the research found, but some charge too much in fees. Such practices are sometimes hidden behind complicated contract terms and pensioners are often unable to tell the difference between a quality service and a poor deal. These factors make the entire annuity buying system similar to a lottery for consumers, the report pointed out.

In order to ensure that all British pensioners are provided with a fair deal, the FSCP suggests that a comprehensive research on the annuity market is conducted, so that regulatory measures can be taken against providers and insurance companies that abuse consumer trust.

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