FCA's latest annuity rules 'fundamentally' flawed
New regulatory rules which require providers and advisers to produce annuity illustrations will not solve the problem of consumer detriment as they are "fundamentally" flawed, according to Retirement Advantage.
From 1 March, Financial Conduct Authority (FCA) rules mean quote comparison templates showing like-for-like rates must be used when producing annuity illustrations.
The measure is being introduced to encourage improved shopping around rates for annuity customers.
However, Retirement Advantage is warning these new measures will not resolve consumer detriment issues due to "fundamental flaws in the way the process works"
It said quotes may be produced on a limited underwritten basis, or only provide standard annuity rates, which will not factor in health or lifestyle information.
It added that annuity comparisons on a like-for-like basis would also not include any medical details.
Retirement Advantage pensions technical director Andrew Tully said: "These changes, although introduced with the best intent, will not improve the outcomes for thousands of people who continue to value the security of a guaranteed lifetime income from an annuity.
"Significant flaws remain where quotes produced on limited information will not highlight the true value of the annuity, and may well result in people locking into uncompetitive deals."
The FCA has previously found that 80% of people who purchased an annuity from their existing provider could have received a better deal by shopping around on the open market.
Retirement Advantage calculated up to 70% of people could qualify for a better income in retirement because of health or lifestyle and yet the majority of people do not shop around.
The provider said it previously found over the course of a 20-year retirement, the average annuity purchased lost £8,460 of income simply because people did not receive the best deal.
The annuity market is expected to be worth about £4bn in 2017 with 40,000 customers looking to secure a lifetime income.
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