This paper presents the findings of our thematic review of the non-advised sales practices of pension providers offering annuities to their existing customers.
August 2025 update: This review is historical. See our what we publish[1] page for more information and current views.
Why did we carry out this thematic review?
Our first thematic review into annuities (TR14/2)[2] reported that many consumers were buying an annuity from their current pension provider, and that they may be missing out on a higher income in retirement as a result. We found that some parts of the market were not working well for some consumers and specifically that many consumers do not shop around and switch provider, even when a high proportion of these would be better off doing so.
As a result, we announced a review that aimed to understand whether firms’ sales and customer retention practices contributed to customers not shopping around and switching. It seeks to mitigate the risk that consumers have a reduced income in retirement as a result of buying the wrong type of annuity or not shopping around on the open market.
Who should read this paper?
- firms selling annuities
- firms which have existing personal or stakeholder pension customers and their representatives
- consumer representative groups
- individual consumers
What did we review?
- we looked at the non-advised sales practices of pension providers offering annuities to their existing customers
- our sample of firms covered 70% of this market, looking at material relating to the period September 2013 to November 2013
- we reviewed customer literature provided by firms leading up to retirement
- we listened to telephone calls discussing retirement income options
- we reviewed potential drivers of risk in the firms’ businesses
What were our findings?
We found evidence indicating that firms’ sales practices are contributing to consumers not shopping around and switching. At times, consumers are potentially buying the wrong type of annuity, in particular not purchasing an enhanced annuity when they may be eligible for one. As a result, consumers may be missing out on a potentially higher income in retirement.
What are the next steps?
We are asking some firms to do further work to determine if our findings in relation to enhanced annuities are indicative of a more widespread problem and/or have led to poor consumer outcomes when buying annuities.
The Financial Services Authority’s (FSA) previous thematic work on Open Market Options in 2008[4] clearly highlighted that firms needed to make improvements in relation to the way consumers were informed about shopping around for enhanced annuities.
We believe that from that time firms should have been in no doubt about their responsibilities to their customers in relation to enhanced annuities.
How can I find out more?
Link to FCA Handbook updated