Labour has accused pensions minister Steve Webb of making policy on the hoof to grab headlines while ignoring the more pressing issue of addressing the flawed annuity sales process.
Labour pensions shadow Gregg McClymont has attacked Webb for floating the idea of facilitating the unraveling of annuity purchases for those who bought products before April 2015, just weeks after resisting a Labour amendment that attempted to improve the annuity sales process.
In November the government rejected a Labour amendment that would have required individuals to seek broker assistance before buying an annuity. Labour pensions shadow Gregg McClymont’s amendment to the Pension Schemes Bill would have required auto-enrolment qualifying pension schemes to ensure retiring members had access to an independent brokerage service before they bought an annuity. Interviewed by Corporate Adviser in November Webb rejected the idea of placing an obligation on annuity providers to ask suitability questions before transacting sales.
The government’s business champion for older workers Ros Altmann has backed the principle of Webb’s idea but says practical issues and costs of sale might make requiring providers to buy back annuities individuals felt had been missold would be a more efficient approach.
McClymont says: “Instead of making yet more policy on the hoof the Pensions Minister should spend his time actually sorting out the annuity sales process with all its defects and potential for detriment to consumers as most recently exposed in the FCA’s report. Accepting Labour’s plan to give all savers access to independent annuity brokerage would be an obvious place to start”.
Altmann says: “This is definitely something worth exploring, but I cannot see it happening immediately. An easier way for this to be done would be for the original company that sold someone their annuity to buy it back from them. This would not involve third parties, but of course the customer is then reliant on only one company to offer them a fair price, without the competition of a market-place. I could imagine this might work in cases where customers feel they were mis-sold an annuity in the first place and the insurer thinks they have a case for a claim. Rather than protracted wrangling, they might offer to buy the annuity back – this could even depend on whether Regulators threaten action on the basis of the FCA Thematic Review.