Poorer pension deal threat for unwell retirees

RETIREES in poor health will be vulnerable to inferior pension deals as watchdogs have excluded them from a crackdown on annuities.

The Financial Conduct Authority (FCA) has been accused of failing to help the frail with its new measures designed to protect pension savers from being ripped off at the point of retirement.

The long-awaited rules will be introduced in March 2018 and will force pension firms to show customers how their annuity deals compare with the best rates offered by other providers.

At present, around nine in 10 older savers are being deprived of thousands of pounds over the course of their retirement as a result of failing to shop around for the best pension payout rates.

The information will be shown in pounds and pence and will appear in a letter called a “wake-up pack” sent to savers approaching retirement age.

But it emerged yesterday that the new rules will not apply to so called “enhanced annuities” which are bought by people whose health complaints or lifestyle choices mean they are likely to die younger.

This is despite annual payouts from enhanced annuities being up to 40pc higher than those paid by standard annuities.

Enhanced annuity rates can only be calculated once someone has undergone a medical assessment, which the FCA has claimed would be too costly for firms.

Stephen Lowe, of financial services specialist Just Group, said: “We are disappointed with the FCA’S decision to prioritise controlling costs to businesses over providing a meaningful level of consumer protection. Previous FCA research has illustrated the improved value customers receive when they go through a full underwriting process.

“The rules have been built around the business model of the firm and fail to put the consumer at the heart of the solution.”

Nathan Long, a senior pensions analyst at Hargreaves Lansdown, said: “Under the rules, the ability to get an improved annuity due to your health or lifestyle will not be prominent enough.”