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FSA launches Pension Annuity Probe

The FSA have launched an investigation into pension annuities, a market that is worth £11bn, after it was revealed that there are growing concerns British pensioners are not getting a fair deal in return for their pension fund when they retire.

An annuity in simple terms is the income you get from your pension once you retire. The amount of income you get directly depends on the value of the pension you have saved up throughout your working life. So the more you have saved, the more you will be paid on a monthly basis once you retire.

However there have been calls for an investigation into the varying rates offered to pensioners for their annuities. Pensioners are currently allowed to, once they retire, take their pension pot and shop around a number of providers in an attempt to secure the most favourable rates possible, under a ruling known as the ‘open market option’

The problem has arisen after it was revealed that there are differences of up to 20pc offered by different providers, potentially leaving some pensioners with hugely diminished annuities. Due to this the FSA has decided on an investigation that will examine both the rates offered to pensioners, as well as the marketing and advertising involved in promoting these rates.

Nick Poyntz-Wright, Head of Life Insurance at the FSA said: “The FCA has set out its vision to make sure markets work well so consumers get a fair deal. We want to understand the potential level of detriment for consumers if they do not shop around”.

If you have any questions about your pension plan please do not hesitate to contact one of our advisors who would be more than happy to deal with your query.

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