Were YOU mis-sold your pension?
Prudential and Standard Life review annuity sales
TWO pension giants are set to pay out millions of pounds to customers who were left with lower levels of retirement income after being sold the wrong annuities for their circumstances.
Standard Life announced it has put aside £175million for compensation and is working with the financial regulator to provide redress.
At the same time, Prudential has agreed with the Financial Conduct Authority to look over sales made since 2008 – experts said the firm could end up paying far more out than Standard Life, due to the size of its customer base.
Before pension freedoms were introduced in 2015, savers were usually obliged to buy annuities with their cash at retirement.
The products provide a set payout for life, but the income level depends on a number of factors.
People with medical conditions can sometimes qualify for so-called enhanced annuities, which pay more than their standard counterparts.
It’s thought that many people who should have bought enhanced products ended up with the more generic and lower paying annuities.
Data from provider Hargreaves Lansdown shows that around six out of ten people will typically qualify for an enhanced annuity.
Prudential said it is examining sales of non-advised annuities and looking at whether they could have received a higher income for itself or another provider.
In a statement to customers it said: “The review will examine whether these customers were given sufficient information about the availability of, and their potential eligibility for, enhanced annuities.
“The review will also look at whether these customers could have potentially received a higher income from Prudential or another provider.
“In due course Prudential will contact customers who may not have been given sufficient information and will provide redress, where appropriate.”
It comes after the FCA reviewed sales made by seven insurance companies.
Tom McPhail, head of retirement policy at Hargreaves Lansdown: “This review is in respect of past annuity sales where the insurance companies largely followed the letter of regulatory law but demonstrably failed to keep within the spirit of regulations.
“Customers who might have been eligible for an enhanced annuity were simply sold a standard terms contract, resulting in a lower level of income.”
Recent FCA data showed around 20,000 people still buy annuities every three months.
Yet it’s feared many retirees are still failing to get the best deal.
Mr McPhail added: “The way to avoid this situation arising in the future is for customers to shop around on the open market.
“Worryingly, FCA data published shows that over half of investors retiring today are still buying their retirement income arrangement from their existing pension provider, which begs the question as to whether the problem has actually been fixed.”
Read the original story on the Express website.
Take a look at our annuity claims page if you think you might have been affected by this story or if you think you were mis-sold your annuity.