The Financial Services Authority (FSA) is set to announce a review of annuities later today (January 31st).
It will examine whether hundreds of thousands of people around the country are getting a bad deal on annuities in their retirement.
Nick Poyntz-Wrighter, the FSA's head of life insurance, told the Financial Times that an annuity is a crucial purchase for an older person to make.
"An annuity purchase is an important one-off decision that has long-term consequences for individuals if they get it wrong," he said, adding: "The Financial Conduct Authority has set out its vision to make sure markets work and consumers get a fair deal."
Stephen Gay, director of life savings and protection with the Association of British Insurers, stated the review is nothing for the annuities sector to be concerned about and described the announcement of the report as "timely".
A 2010 FSA study found that only 40 per cent of consumers compared offerings before selecting an annuity, while a majority simply accepted the rate offered by their existing insurer despite the warnings from sector specialists to compare and contrast rates before picking one.
This is in spite of recommendations from across the industry that older people shop around for the best rates on an annuity, as this could save them thousands of pounds.
Insurers have been obliged to tell their pension savers of their right to use the Open Market Option since 2002, but many are not using this. With annuity rates having been steadily dropping since the financial crash of 2007, a failure to shop around for an annuity could be set to have a major impact on retirement incomes in the coming years.
This news comes shortly after the FSA confirmed that Marian Glen and Charles McKenna will be taking up new non-executive director positions at the board of the Financial Services Compensation Scheme from February 1st.
People who want to find out more about annuities and their other financial options as they go into retirement can get in touch with the experts at Key Retirement Solutions for advice and details.
Posted by Richard Planner