FCA tells advisers to inform clients on best annuity rates

Advisers will be asked to tell clients that the annuity they are being recommended may not produce the best annual income if the firm lacks details of all market rates. The requirement is contained in new rules outlined by the FCA, with the aim that the consumer can then shop around more widely if they choose to.Regulatory bosses launched a consultation late last year over fears consumers were failing to shop around and find the best deals. The FCA has now published the final rules.This also confirmed advisers must provide clients with an information prompt before committing to buying a guaranteed annuity.The FCA document stated: “Where a consumer uses an intermediary firm that sources annuities from the whole market, including a broker or independent financial adviser, the consumer is likely to be quoted the best rate available on the market.“However, where the intermediary firm does not have access to every rate available, it is possible that the quote presented by the intermediary firm does not produce the best annual income available to the consumer.“In that situation, the consumer would benefit from being made aware of this so they can shop around more widely if they choose to do so. If the quote presented by the intermediary firm is the highest available to the consumer, we consider that the consumer would also benefit from receiving confirmation of this.“We consider that the requirement to provide the information prompt should apply to any firm providing a guaranteed quote to a retail client.”Where a consumer uses an intermediary firm, both it and the relevant annuity provider will be required to provide the information prompt, the FCA said.Officials stated: “We recognise that this potentially duplicates the information provided. The final rules, therefore, mandate that where an intermediary firm is used by a consumer, the intermediary firm is able to rely on the information prompt given by the annuity provider, if it is satisfied that it is appropriate to do so. This approach was envisaged in CP16/37, but following feedback we have made the rules clearer on this issue.“Our rules require that the information prompt must be provided when a guaranteed quote is given by a firm to a retail client. Accordingly, where multiple guaranteed quotes are given by a firm to a consumer, the rules require that the information prompt must be provided in relation to each of these quotes.“We accept the argument that this approach results in the consumer receiving more information to digest.“However, we consider that a requirement to only, for example, provide an information prompt in respect of the first quote provided by a firm, would not be consistent with our policy intent – for example, where a consumer proceeds with a subsequent quote.”The only exception is in relation to non-written quotes, which, the papers added.

FCA tells advisers to inform clients on best annuity rates

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