Almost 40 per cent of companies that write pension annuities provide customers approaching retirement with literature that fails to meet with rules and regulations, the Financial Services Authority (FSA) has said.
Customers are not always being treated fairly by some companies that violate Open Market Option rules, providing information which does not meet with the FSA's requirements, a report has said.
As part of its broader framework of Treating Customers Fairly (TCF), the FSA
has found that more than 60 per cent of the 55 annuity firms assessed for fairness do provide clear information to their customers, to enable them to make informed decisions about planning for their retirement, but a significant percentage failed in this area.
The findings show that many pension
firms are failing in the areas of information and sufficient speed when dealing with transfer cases. Delays have been noticed, and accounted for by the complexity and diversity of forms used to complete the transfer of a pension from one firm to another.
The parties in question must make changes to their literature and processes by the FSA's December deadline for TCF targets, the report said, and the regulator will take direct action if improvement is not evident.
"The decision on whether to buy an annuity from a current provider or to switch to another insurer on the open market can influence an individual’s lifetime income." explained Sarah Wilson, director of Treating Customers Fairly and insurance sector leader at the FSA.
"Poor communications from insurers may result in people making poor decisions or failing to take any action to maximise 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.
The FSA will use their assessment of firms in light of pension policy transfer to assess their TCF compliance more widely, she added.
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