Retirees with an enhanced annuity from Standard Life may be due redress, as the firm has confirmed it’s been forced by the regulator to review all non-advised annuity sales since July 2008.
The insurer says it will conduct a review to “identify whether our customers received sufficient information about enhanced annuities to make the right decisions about their purchase”.
However, it adds that it can’t yet determine a “reliable estimate” of the redress it may need to pay to customers.
The move follows an investigation by the Financial Conduct Authority (FCA) into the enhanced annuity market, which found as many as 90,000 people could be due redress amid concerns they were mi-sold standard annuities when they could have got a higher income from an enhanced deal.
The regulator has said people who were mis-sold could be due between £120 and £240 for each year since they bought their retirement income. It has asked a “small number” of firms to investigate historic annuity sales as a result, though it insisted there was “no evidence” of industry-wide or systemic failure in the annuities market.
However, as pointed out by former pensions minister Ros Altmann, while the FCA’s investigation only looked at seven companies, these cover two-thirds of the market, so even if just two companies were at fault it would represent almost 30% of the companies under scrutiny. If three companies were at fault this would account for over 40% of the companies investigated.
Over 3 million people have bought annuities during the period investigated by the FCA – from 2008 until now - and customers who weren’t eligible for enhanced-annuities may also have suffered due to insurers’ sales tactics.
Ms Altmann adds: “The FCA indicates that its findings could mean at least 90,000 people will need compensation for wrongly sold annuities, but it is still investigating more firms and there is bound to be more redress due. This is taking many years.
“Urgent action is so important because the annuity market since 2008 has covered over three million people. Many of those worst impacted by any failure were in poor health and will have been living on much lower incomes than they are entitled to, some may have already died. At the moment, these annuities are completely irreversible so customers will be poorer for life if they receive no redress.
“It is worrying that the FCA study found that most of the firms were not selling annuities properly. Such failures are of concern, even if the FCA concludes that people may not have suffered losses in the majority of cases. Given the huge numbers of people involved, even a small proportion of customers is a large number of people.”