Date of consultation
14 February 2014 – 14 March 2014.
Summary of feedback received
We received 12 responses to our guidance consultation paper[2] from a range of respondents including firms, consumers and trade associations on behalf of their members.
Respondents were mainly supportive of the guidance and welcomed us making clearer our expectations of what constitutes a fair, clear and not misleading annuity comparison website. So we are not making any significant changes to the guidance.
We address the main points raised by the respondents in this document. Where relevant, we have added some additional text to the guidance to clarify our views and expectations.
The points raised by the respondents covered the issues of prominence, the scope of our review, guaranteed annuities and guaranteed rates/periods, Financial Services Compensation Scheme / Financial Ombudsman Service coverage, restricted panels, commission and charges, tax and the purchasing context/alternative options.
Response to feedback received
The responses to our guidance consultation covered eight main areas. The issues raised are listed below alongside our response:
- Prominence
A number of respondents asked us to be clearer on our expectations on prominence. We address this issue at point 1.11 of the guidance consultation, which provides our guidance on prominence.
- Wider scope
Several respondents believed our review should be wider to include lead generators and post-sale and governance issues. However, due to the limited scope of our review, in terms of time allocated and available resources, this would not have been possible.
- Guaranteed annuities and guaranteed periods/rates
A number of respondents believed that further detail should be provided by annuity comparison websites regarding the different types of guarantees available to those purchasing annuities – including annuities that provide an income after a partner’s death. These respondents also felt that the benefits and likely better rates paid by guaranteed annuities should be prominently included in our guidance.
We have consequently amended the fifth bullet point of our guidance to reflect that guarantees can be obtained including for surviving partners and the twelfth bullet point to include the phrase ‘other benefits’.
- Financial Services Compensation Scheme (FSCS) / Financial Ombudsman Service (FOS)
A respondent believed that we should give further clarification about the level of detail expected for FOS/FSCS eligibility. The level of detail will depend on the context, but during a basic annuity comparison website journey, we would expect the fact that FSCS/FOS coverage may apply to be prominently featured.
- Restricted panel
Several respondents felt that we should provide greater detail on our expectations of how firms present restricted panel information and that if there is a restricted panel for enhanced annuity quotations, this should be prominently presented too.
We have consequently added: ‘With a restricted panel the providers searched should be identified, including where a restricted panel for enhanced annuity quotations has been used.’ to the ninth bullet point.
- Commission and charges
Some respondents asked us to clarify whether commission and charges should be expressed as a monetary figure or in percentage terms. Another respondent believes that the term ‘commission’ should be replaced by ‘non-advised fee’, so that consumers are aware that the payment comes out of their pension fund.
Commission and charges should be presented in a way that is fair, clear and not misleading. Consequently, whether they appear as a percentage or monetary figure will depend upon the context and individual circumstances of the consumer in order to be accurate and relevant. So we would leave this decision for firms. Additionally, introducing a new term ‘non-advised fee’ has the potential to cause confusion, with ‘commission’ being the industry standard. Further, as commission details should be prominently featured, there is therefore no potential for consumer detriment.
- Tax
A respondent believed that the current required tax risk warning should be accompanied by sign-posting as to where further information could be obtained. But we do not feel this is necessary as the tax risk warning is fairly high-level - indicating that tax treatment may change in the future. Consequently, any reference to further information would likely not be able to confirm future tax changes.
- Context and alternatives
A respondent believed that consumers should get an explanation of the effects of inflation and the benefits of taking a cash lump-sum. We believe that these points are already covered at a high-level by the existing guidance.
A respondent felt that consumers should also be made aware that the cheapest annuity is not necessarily the best and that consumers should also consider whether it is appropriate to stop working and purchase an annuity without receiving advice. We believe that whether to provide this level of detail would be up to the individual firm.
Changes made to the guidance as a result of feedback received
In response to the feedback received (as outlined above), we have made some changes to the guidance to give greater clarity to our expectations of firms when creating and operating annuity comparison websites.