Now end the ANNUITY INJUSTICE

As the Pru is fined £24m for mis-selling retirement policies, Money Mail reveals it’s just the tip of the iceberg . . .

PENSION giants made more than £1.8 billion last year because their customers died earlier than had been expected.

Annuity firms made the extra cash when — for the first time on record — life expectancy in the UK did not improve.

The findings will come as a major blow to those tens of thousands of pensioners cheated out of a fair deal for their life savings in a major annuity mis-selling scandal.

Pensioners can buy annuities using their pension pots to provide a guaranteed income in retirement.

The income you get in exchange for your savings is calculated on life expectancy — so if you die sooner than predicted, the insurer makes a bigger profit. But many retirees who bought annuities were not told they could get a bigger income if they shopped around or had health conditions that meant they had a shortened life expectancy.

Money Mail has long campaigned to free those trapped in poor-paying annuity deals.

This week, the Prudential was fined £24 million for its part in the scandal. Regulator the Financial Conduct Authority (FCA) revealed on Monday how the firm’s staff were rewarded with huge bonuses, holidays and spa breaks for making the most sales.

Now experts say any providers who sold rip- off annuities may have profited twice from customers who died sooner — many of whom may have deserved much better rates.

In 2017, for the first time since records began in 1982, life expectancy did not improve. And company reports show that firms, including Prudential, made a total of £1.8 billion last year as a result.

Prudential, which is facing a total £250 million compensation bill for mis-selling annuities, made £411 million last year from the stall in life expectancy.

Standard Life was also fined £31 million by the FCA this summer for failing customers. It sold its annuity business last year to Phoenix Life — which made an extra £168 million.

Aviva made an extra £780 million. It was not probed further by the FCA, but it did admit to selling the wrong annuity to at least 250 sick pensioners.

Legal & General was also thought to be part of the regulator’s review, but faced no further action. The insurer made £433 million last year — also as a result of ‘changes in longevity improvement assumptions’.

Former pensions minister Ros Altmann says: ‘Lots of people who got these poor-value annuities are not even with us any more.

‘Many pension providers will have based their forecasts on life expectancy continuing to go up, and now are profiting at the expense of customers.’

Tom McPhail, head of retirement at Hargreaves Lansdown, says: ‘There has been a lot of poor practice in the past in terms of how annuities were sold, so understandably those who were forced to buy annuities before pension freedoms will still feel bitter about it.

‘I can see people will look at this and it will re- enforce the sense that they have been hard done by.’ Steve Webb, director of policy at Royal London, says: ‘For many years, life expectancy has been improving faster than expected and insurers and pension schemes have had to find extra money to meet their obligations. Sadly, those improvements have slowed and, as a result, many insurers have surplus funds which they did not expect.’

While life expectancy did not improve for men and women in 2017, it rose again in 2018, according to figures released by the Office for National Statistics last week.

This means that annuity income rates, which hit rockbottom last month, could plummet even further.

A spokesman for the Association of British Insurers says: ‘An annuity provides a guaranteed income for life — regardless of any future changes in life expectancy, investment returns, interest rates or the health and lifestyle of the customer.

‘ If life expectancy rises, or interest rates fall, insurers will take the resulting financial hit, and customers will still receive the pension they expect.’