A consumer protection organization in the U.K. has recommended sweeping reforms for that country’s annuity purchasing system. In essence, the Financial Services Consumer Panel (FSCP) is advocating for better transparency and oversight over services that provide annuity purchase advice.
The panel is an independent statutory body set up to advise the U.K.’s Financial Conduct Authority (FCA) on issues related to consumer protection. Similarly, the FCA has undertaken a study of whether consumers are getting a fair deal when they purchase an annuity.
In the U.K., citizens can purchase an annuity from their “host” pension provider or shop the “open market option” (OMO). However, in its report, the panel found that while retirees are increasingly purchasing annuities through the OMO, they are doing so without getting advice and instead buying through “non-advice” Internet websites that may provide less consumer safeguards.
Moreover, those consumers who do shop the open market found the process confusing, and the panel stated that websites were hazy regarding charges, didn’t fully explain the difference between the protection offered through the advice and non-advice options, and that searches for quotes covered the entire or only part of the market.