How are annuities regulated?

Written by Retirement Line

How am I protected when I purchase an annuity?

You have the reassurance of considerable consumer protection when arranging your pension annuity. From your initial conversations with an adviser or broker through every step of the process, regulation is there to provide safeguards to ensure the fair treatment and protection of consumers.

We hope this guide to pension annuity regulation and standards will be of interest and help if you are considering this option to provide a guaranteed income for your retirement. We explore who regulates annuities in the UK and what protections are in place for consumers.

If you wish to arrange professional guidance on your annuity options, please call us on 01733 973038 or request a free call back here to speak to one of our Annuity Specialists.

On this page:

• The Financial Conduct Authority

• The Financial Services Compensation Scheme

• The Financial Ombudsman Service

• What if I have a complaint about the service I receive?

The Financial Conduct Authority

In the UK, brokers and advisers offering regulated services in relation to pension annuities, and any company providing you with an annuity, must be authorised to do so by the Financial Conduct Authority (FCA). 

As the UK’s financial services regulator and watchdog, the FCA works to ensure that the industry operates responsibly and that consumers can access products that meet their needs and expectations. 

The FCA does this by setting extensive standards regarding pension annuity products and the conduct of firms. For instance, providers must offer clear information about fees, charges, product options and associated risks to help people make informed decisions. The FCA also regulates the sales process to prevent mis-selling.

The FCA Handbook lists all the standards it has set for annuity brokers, advisers and providers. One example of this is the information an annuity quotation must contain, which includes:

• How much annual income your annuity will provide.

• The cost of the annuity including any commission.

• Whether the annual income will increase in value over time.

• Whether any payments will continue to be paid to a beneficiary.

As part of their regulation of pension annuities, the FCA also requires businesses to treat customers fairly and transparently. Firms must communicate clearly, providing information in a language and format that is easy to understand. 

Did you know?

Retirement Line has been authorised by the FCA to provide guidance on annuities since 2016. Our details can be found in the Financial Services Register. Please enter Retirement Line’s registered number 726601 to access our record in the Register. 

The Financial Services Compensation Scheme

Consumers purchasing an annuity provided by UK-regulated insurers also benefit from the full protection of the Financial Services Compensation Scheme (FSCS). This means that eligible customers can claim compensation from the FSCS, covering 100% of their pension with no upper limit, if their annuity provider goes out of business.

In addition, if a UK-regulated adviser has given bad advice concerning a pension, the FSCS may be able to pay compensation up to £85,000 if the adviser has failed. If the adviser is still trading, you can complain to the Financial Ombudsman Service (see below).

In 2023, Lila Pleban, Chief Communications Officer at FSCS, said: “It is clear from our latest research that those aged 50 and over must have access to the knowledge and tools they need so they can choose the right retirement product for them. That’s why at FSCS we are committed to empowering and educating consumers, so they feel confident about the decisions they make when it comes to their money.”

You can check if you're eligible to claim against the firm that gave you advice to choose a product or policy.

Did you know?

The FSCS can only protect you if the Financial Conduct Authority (FCA) has authorised your annuity provider, so do check your provider before committing to anything. To help you benefit from the above protection, Retirement Line’s panel of annuity providers only includes FCA-authorised providers.

The Financial Ombudsman Service

Set up by Parliament in 2001, the Financial Ombudsman Service is a free service that settles complaints from consumers about firms that provide financial services, including pension annuities.

The service recommends that you first give the relevant business an opportunity to resolve things. So, if you have a complaint, you will need to explain to your pension annuity broker, adviser or provider what it is that you wish to complain about, and the reasons why.

If you’re not happy with the response you receive, you can escalate your complaint to the Financial Ombudsman Service. They will impartially weigh up the evidence and tell you what they think. 

If the Financial Ombudsman upholds a complaint, then they will seek financial compensation and/or reconstructing pension plans where possible. They might also make an award for any trouble and upset caused.

The service is designed to be simple to use and without any legal representation required. If you have a complaint about a financial services firm, you can check the Financial Ombudsman Service’s how to complain guidance and use their online complaint form. 

What if I have a complaint about the service I receive?

If a firm is authorised by The Financial Conduct Authority, it must have procedures in place for resolving disputes with their customers. The FCA also stipulates that complaints must be acknowledged promptly and you must receive a response within eight weeks at the latest.

The FCA offers some handy ‘How to complain’ information for those who feel unhappy with the service they have received. If you follow this guidance and are still not happy with the firm’s response, you can contact the Financial Ombudsman Service to take things further.

Talk to Retirement Line about your annuity options 

If you are considering an annuity for retirement income, our friendly specialists are here to help. They will explain your options and explore how much guaranteed income you could achieve from your pension fund.

You can speak to our team today by calling freephone 0800 652 1316 or request a call back. Alternatively, use our free online tools for an instant estimate of how much annuity income you might expect to achieve.

Sources:

Financial Conduct Authority Handbook. COBS 19.9 Pension annuity comparison information. Accessed 22 April 2024.

Financial Services Compensation Scheme. What we cover: Pensions. Accessed 23 April 2024.

Financial Ombudsman Services. Pensions and Annuities. Accessed 23 April 2024.