The other annuities scandal

As Government bars retirees from cashing in pensions...

TODAY, Money Mail urges you to claim YOUR slice of compensation for the pension annuity misselling scandal. This is vitally important now that the Government has ruled you won’t be able to sell your annuity for a cash lump sum.

we want you to bombard insurers with letters so the greedy firms can’t exploit their customers any longer.

The door has finally been thrown open to redress after years of rip-offs by the giant firms looking after your pension.

Until last year, most people bought so-called annuities when they retired. These complicated insurance deals turn a pension pot into a guaranteed income for life.

we warned repeatedly that insurers were cheating loyal customers out of vital income.

Anyone in poor health when they retired should have received a boost to their annual payout — but statistics showed very few did.

The City watchdog has, at last, confirmed that thousands of customers were given the wrong deals.

In a review of sales since 2008, the Financial Conduct Authority (FCA) said some pensioners with medical conditions were sold annuities designed for healthy customers.

victims were typically deprived of between £120 and £240 a year each, but this could range into the thousands for those with larger pots.

The regulator pinpointed poor practice at several major firms and ordered compensation to be paid to 90,000 customers.

The victory should mean sick pensioners finally get a fair deal. But the small print of the report still suggests many could miss out.

Crucially, the regulator has allowed the same firms that ripped off their customers to decide who deserves compensation — and how much they should get.

we can also reveal the 90,000 customers identified by FCA are merely the tip of the iceberg. The FCA investigated seven unnamed firms, accounting for just two-thirds of the market.

If your provider wasn’t in the study, you’re unlikely to win redress.

Our research suggests far more than 90,000 of the 3.2 million pensioners who bought annuities since 2008 could be owed money.

Medical studies have repeatedly shown that six in ten suffered from a health condition and would have qualified for a better deal.

Smokers should have received around a tenth more due to shorter life expectancy.

Someone who had multiple heart attacks should have received up to an extra third, as should a customer with type 2 diabetes. Someone with asthma was due around a fifth extra each year. However, just two in ten got a so-called enhanced rate. That means up to 1.3million customers who took out deals since 2008 could be receiving too little income.

Standard Life said it had been instructed to review all sales since 2008. Industry experts believe Prudential is also reviewing past sales. Prudential would not comment. Others firms that are part of the FCA review, thought to include Legal & General and Aviva, are being probed no further. Firms such as Royal London and Aegon, thought to be left out of the FCA investigation, may not take any action at all.

The City watchdog also chose to focus on annuity sales since 2008.

But experts say you could have a case for mis-selling if you were sold a pension as long ago as 2001.

So check your annuity contract immediately. If you had even a minor health condition, it should say you got an ‘enhanced’ or ‘impaired’ rate. If it doesn’t, you may have been given the wrong deal. You will need to prove you were mis-sold.

Think back to the original sale. Your insurer should have clearly explained the importance of shopping around for a better rate.

It should also have asked you whether you had any health problems, smoked or drank, were overweight or had high blood pressure. If the firm didn’t, you may be due compensation. Even if your insurer didn’t sell enhanced deals, it has no excuse — it should have told you better rates were available at other firms.

It was not enough for them to make a passing reference to these boosts; insurers were obliged to stress the benefits on the phone and in any documents you were sent.

The FCA is concerned some customers were persuaded to stick with their existing firm because call centre staff said they’d get their 25 pc tax-free cash more quickly. If this happened, you have a strong case. You could also claim compensation if you told your insurer that you were sick, but the call-centre handler said you were not ill enough to receive an enhanced deal.

Although some firms only offered enhanced annuities for serious health conditions, such as cancer and heart problems, others offered extra payouts for issues such as high blood pressure and type 2 diabetes.

Your insurer should have told you that you could go elsewhere if it didn’t offer a deal for you.

If call-centre staff told you any boost from shopping around wasn’t worth the effort, you were mis-sold.

The City watchdog is particularly concerned about savers who bought their annuity over the phone.

HOwEvER, if you took out your annuity in writing, you can still apply for compensation. Shortly before you were due to retire, you should have received a letter from your insurer outlining your options.

If this wasn’t clear enough or didn’t mention that you should shop around or could get an enhanced annuity, again you should have a case for compensation.

You can also claim a payout on behalf of loved ones who have since passed away if you believe they were mis-sold.

The FCA is thrashing out how compensation should be paid by firms. It says it expects customers eligible for a payout to receive compensation at a set rate.

Industry insiders say this is likely to be how much a customer has missed out on over a standard retirement, plus interest of 8 pc on backdated payments.

For example, in 2009 a 65-year-old man with a £100,000 pension who was overweight and smoked could typically have obtained an extra £2,000 a year. with 8 pc annual interest added, he could claim roughly £22,000 in compensation.

while the FCA said there was ‘no evidence of an industry-wide failure’, it has launched a further study to decide whether firms guilty of poor practice should be fined.

Yvonne Braun, of the Association of British Insurers, said: ‘we are pleased, but not surprised, that this wide-ranging FCA review found “no evidence of an industrywide or systemic failure to provide customers with sufficient information about enhanced annuities through non-advised sales”.’