Following the Retail Distribution Review, there will be greater confusion over annuity rates with different rates being offered by providers that are both exclusive and inclusive of commission, cautioned insurance and pensions provider Legal & General.
Protection providers currently offer only one rate, whether it is direct to the customer, their own internal customers or to the IFA, said L&G.
The situation will however, change after the RDR. “Some IFAs have their own portals and there are other industry portals where IFAs can compare rates and it is not totally clear to us how IFAs themselves are going to compare rates between different companies because some IFAs will be advising and some will be non-advising,” said Phil Naylor, compulsory purchase annuities director at L&G.
“An IFA firm can have different propositions for different customers. It is going to make the whole thing much more difficult,” he added.
Even the counselor Money Advice Service, that provides comparison tables for annuity rates, was not clear how rates will be compared post-RDR.
“We actually asked the Money Advice Service as they have a website that you are able to go on and compare annuity rates,” said Mr. Naylor.
“We said to them: ‘Once RDR is in, which annuity rate should be posting on your site?’ and they came back with the answer: ‘we want the rates most consumers will buy at’. But what does that mean? I don’t think they have even worked it out yet for their own website let alone tell the industry what they should be doing.
“At the moment consumers can go to websites and they know what rate they will get but post-RDR you are going to have to have different prices for different rates,” he added.
Money Advice Service was currently “in discussions” with all the stakeholders including the FSA, the Association of British Insurers, other financial providers, and data service providers about the implications of the RDR, said the spokesperson for the Money Advice Service, Nancy Baynes.
“We’re working very closely with them to work out how we can give customers the best, most useful information. Discussions are at an early stage, and no final decisions have yet been made. This is a key piece of work and we will continue to work closely with the industry and consumer groups to ensure we get it right,” said Ms Baynes.