ANNUITY fees may be “excessive” and need investigating, the Financial Services Consumer Panel said yesterday, pushing for more transparency in the sector.
Its report found insurers making profits twenty times greater on annuities than on other products, indicating inefficiencies in the market and bad deals for savers.
The huge fee incomes are possible as a result of unclear and hard-to-compare fees, the study found, allowing brokers and insurers to take tens of thousands of pounds from savers with little worry of them moving elsewhere.
A lack of advice is also preventing consumers making good decisions, the report found – it said advice should be economical for those with savings pots of more than £25,000 but in fact is often only used by those with more than £100,000.
“We are seeing a shift towards purchasing annuities via non-advice routes, which means reduced consumer protection if things go wrong,” said Consumer Panel chair Sue Lewis. “We urgently need to reform this market, particularly for those with smaller pension pots, who usually can’t get independent advice. Our recommendations are intended to make choosing the right annuity more straightforward.”