Direct annuity services ‘are not TCF’

Insurers are not treating customers fairly by setting up direct-to-consumer annuity services, according to Intelligent Pensions.

Technical director, David Trenner, questions the motivations of insurers like Legal & General and Aegon, both of whom have taken steps to offer annuities directly to consumers.

Legal & General recent extended its unadvised annuity service to sell enhanced annuities, while Aegon plans to set up a direct-to-consumer arm, selling standard and impaired life annuities.

L&G says its service has been popular with consumers, and says there is significant demand for consumers who are confident in buying an annuity by themselves.

However, Trenner says: "Being confident enough to buy an annuity and understanding all of the issues involved are two completely different things."

He points to recent stats which show 64% of all annuities are on a single life basis, with no provision for a widow, as evidence many people do not really understand the financial concerns they may face in old age.

"Someone who does not know what other options are available may be happy buying a single life, non increasing annuity, because it will give them the highest level of starting income. But if they underestimate their own life expectancy they will be mis-advising themselves," he adds.

"Could it be that the likes of L&G and Aegon are looking to increase profits by cutting out the cost of advice? If so they will not be treating customers fairly!"