Pensioners can claim compensation for mis-sold annuities, according to FCA

People who were sold the wrong annual retirement income scheme are entitled to receive compensation, according to the Financial Conduct Authority (FCA).

An estimated 90,000 people were put on a basic annuity scheme when they could have been entitled to receive more on an enhanced annuity.

Enhanced annuities help people with shorter life expectancy due to poor health to get a better deal.

According to the report, pension providers usually provide advice to customers over the phone, wherein staff are heavily reliant on a script. As a result customers were led to buy a standard annuity when they could have been offered a more tailored deal.

Customers who have fallen victim to this are eligible to claim compensation ranging between £120 to £240 for each year they had the product.

The FCA’s investigation into annuity sales, did however find that this was not an industry wide problem.

"While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules," said the report.

The regulatory body looked into annuity sales made to customers from May 2008 to April 2015.

"Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement," said Megan Butler, from the FCA.

Annuity rates, which determine the value of the pension income, fell drastically after the UK’s vote to leave the EU after a series of falls for many years prior.

Sales for the annuity scheme also fell after new rules allowed people to withdraw from their pension pot from the age of 55 subject to income tax.

Jackie Spencer, from the government-backed Money Advice Service, said: "Getting access to the right information at retirement is vital so that people can decide whether an annuity is the right option for them. Shopping around for an annuity and comparing the options will ensure that people are making the most of the money they have, and their money lasts for the full length of retirement."

The FCA encourages all pension providers to strengthen their communications and sales process to ensure all customers get the information they require at the time they require it.