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Delays affect 60% of annuity transfers, FSA report says
Damning report from city watchdog says many firms need to make improvements.
Markets
More than half of annuity transfer cases experience delays, according to the FSA’s latest review of open market options.
The watchdog’s much-awaited review revealed that many firms need to make improvements to ensure pension customers were being treated fairly.
The review found delays occurred in over 60% of 238 annuity transfer cases reviewed and said complexity of the process and confusion caused by the diversity of forms were key reasons.
Sarah Wilson, director of treating customers fairly and insurance sector leader at the FSA, said that the decision to purchase an annuity was critical to ensuring customers were being treated fairly.
‘The decision on whether to buy an annuity from a current provider or to switch to another insurer on the open market can influence an individual’s lifetime income,' Wilson said. 'Poor communications from insurers may result in people making poor decisions or failing to take any action to maximise their retirement income.’
She added that transfer time was also key to ensuring people had enough money in retirement. ‘At the same time, if a consumer decides to exercise the open market option, they can suffer if fund transfer does not happen in a timely manner,' Wilson said.
'The way that firms deal with pension policyholders provides an indication of how they treat their customers more generally, and we will be looking for firms to demonstrate good practice in this area when we come to assess their overall TCF compliance in light of the December deadline.’
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3 comments so far. Why not have your say?
Richard Hardy
Jul 31, 2008 at 17:50
So will the FSA actually do anything?
Probably not is the answer.
No doubt they'll have another review reviewing the previous reviews and decide to jump all over the IFA sector when they should be getting a hold of the likes of AXA and Windsor Life and give them a good kicking for their atrocious service standards.
report thisDavid Chapman
Jul 31, 2008 at 21:41
1. I have tried to contact Axa today - at 17.50 but as usual all were busy gave up after 10 mins
2. This was to chase up a query that they could not answer a week ago and promised to contact me concerning terminal bonus on my pension policy due to mature in Nov 2008
3. If this is an example of their customer service I dread to think how I will be treated when I wish to exercise the open market option
AND THEY ARE HOLDING 10s of THOUSANDS OF MY MONEY !!!!!!!
report thisWilliam Phillips
Aug 01, 2008 at 09:13
One more reason not to save for your old age in a "professionally managed" pension scheme.
The whole notion of sudden-death choices about how to dispose of your accumulated fund, whether shopping around for an annuity or not, is crazy anyway. With the minor concessions of the 25% tax-free lump sum and a limited choice of retirement date (which for many has to be at the first opportunity, given the miserly State pension), you are forced to tie yourself into the current annuity market rate for the rest of your lifeL always assuming the experts tell you how to shop around.
In practice most folks are inertia-sold on sticking with the manager's rate, which can be mucho basis points lower.
Drawdown and the like may mitigate the burden of having to sign away the monies you've saved in exchange for an income that dies with you or your spouse, and which will only be assured of keeping up with living costs (inflating faster for pensioners) if you take a huge initial hit on income in exchange for indexation.
But the concept of now-or-never decision making in retirement is fundamentally wrong. Any gumming up of the works in the course of trying to escape from your previous manager via the OMO, as discovered here, is only one more irritant.
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