Pensioners in line for payouts as Pru reviews retirement annuities
Prudential has said it will review retirement annuities sold after July 2008, and make payouts to pensioners where appropriate, amid concerns that some customers may not have been given sufficient information about their deal.
The review has been prompted by a probe into the industry generally by the Financial Conduct Authority (FCA), which raised concerns that the way some deals were sold could have caused some customers to buy a standard annuity when they could have been eligible for a product with a better rate.
Prudential said it has agreed with the FCA to review annuities sold without advice after July 1 2008 to its contract-based defined contribution pension customers.
The review will examine whether these customers were given enough information about the availability of, and their potential eligibility for, enhanced annuities, which may pay people with ill health, such as smokers, higher retirement incomes due to their shorter life expectancies.
Prudential's review will look at whether customers could have potentially received a higher income from Prudential or another provider. Prudential said it will contact customers who may not have been given sufficient information and will provide redress, where appropriate.
Standard Life has also said it has made provision of £175 million for non-advised annuity sales practices.
Annuities give pensioners the security of a fixed income, often for the rest of their life, but they have been controversial due to concerns about people failing to shop around to get the best deal for their needs.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said annuity customers should shop around on the open market.
In October, the FCA estimated that around 90,000 retirement annuity holders across the industry could be in line for compensation and that those receiving payouts may get around £120 to £240 per year.