Aviva is being urged to contact all customers who bought one of its pension annuities after seeing a television advert that promised them up to 20 per cent more income than rival companies could offer.
This call has come from consumer group Which?, following the banning of the advert by the Advertising Standards Authority (ASA) on the grounds that the income claims were misleading.
The controversial advertisement was broadcast between May and June last year at peak times on major TV stations and featured former Fast Show star Paul Whitehouse.
Whitehouse, who played a recent retiree, said: “Aviva got me nigh on 20 per cent more income from my pension pot.” A voiceover in the same advert then said: “When you retire, get up to 20 per cent more income with Aviva.”
However, the claims did not stand up to the scrutiny of the ASA, the independent regulator. “We considered that we had not seen evidence that demonstrated that Aviva could get consumers up to 20 per cent more annuity income than other providers,” said the ASA in its adjudication. “We concluded that the claim was misleading.”
Aviva has accepted the ASA’s decision but said it was “disappointed” at the regulator’s interpretation of its data. It claimed: “The advertising was based on thorough research of market rates.”
Which? has said it “should now be for the FSA to investigate this issue to find out whether the claims were repeated during the sales process and whether a financial penalty should be imposed”. It is also demanding that Aviva contact customers who responded to the advert to inform them that the income claims were misleading.
Aviva said that it would not be contacting customers – arguing that the majority were likely to have bought their annuities through independent financial advisers, who would have shopped around for the best rate.
Nevertheless, the provider has admitted that it has also been approached by the Financial Services Authority (FSA). “We have previously shared the data used to support the ‘up to 20 per cent’ claim with the FSA, but nothing further has been requested,” a spokesman said.
The FSA, which requires companies to ensure their promotions are fair, clear and not misleading, said it “doesn’t comment on investigations, nor confirm or deny whether an investigation is taking place”.
Aviva also declined to say whether the “up to 20 per cent” campaign had led to an increase in sales, saying the intention of the advertisement was “to encourage individuals to use the open market option and shop around for an annuity, which the government is also working with insurers to encourage”.
But Aviva’s interim management statement shows that it wrote £1.7bn-worth of individual annuity business in the third quarter of 2010 – more than in the whole of 2009.
The ASA’s sanction against the industry heavyweight comes as the FSA faces calls to tighten up the sales process for annuities, where a sale is irreversible once made.
“The FSA is asleep at the wheel,” said Dr Ros Altman, director-general, of the Saga Group. “Providers, advisers and the FSA know that most people do not understand how annuities work. More needs to be done to ensure retirees are making the best and most informed decision and not are buying on the rate but best annuity that suits their health and lifestyle.”
She added: “Annuities should come with risk warnings and using shop around should be the default option.”
Individuals now poised to buy an annuity where advised to not settle for the offer made by the pension savings provider but to use the “open market option” and shop around. Currently, only about one third of pension investors buy an annuity on the open market.
“Which? recommends you take Independent Financial Advice which looks into products from the whole market rather than simply accepting an annuity from your existing pension company,” said Mr Lindley from Which?
IFAs say that shopping around means that they are more likely to get a quote which will take into account health factors such as smoking or diabetes which could lead to an enhanced rate.
“Shopping around for a retirement income is not just a question of getting the best rate, but also considering whether to include a spouse’s pension, or escalation, or indeed considering other options such as Drawdown where appropriate,” added Laith Khalaf, pension analyst, with Hargreaves Lansdown, the independent financial advisers.
This call has come from consumer group Which?, following the banning of the advert by the Advertising Standards Authority (ASA) on the grounds that the income claims were misleading.
The controversial advertisement was broadcast between May and June last year at peak times on major TV stations and featured former Fast Show star Paul Whitehouse.
Whitehouse, who played a recent retiree, said: “Aviva got me nigh on 20 per cent more income from my pension pot.” A voiceover in the same advert then said: “When you retire, get up to 20 per cent more income with Aviva.”
However, the claims did not stand up to the scrutiny of the ASA, the independent regulator. “We considered that we had not seen evidence that demonstrated that Aviva could get consumers up to 20 per cent more annuity income than other providers,” said the ASA in its adjudication. “We concluded that the claim was misleading.”
Aviva has accepted the ASA’s decision but said it was “disappointed” at the regulator’s interpretation of its data. It claimed: “The advertising was based on thorough research of market rates.”
Which? has said it “should now be for the FSA to investigate this issue to find out whether the claims were repeated during the sales process and whether a financial penalty should be imposed”. It is also demanding that Aviva contact customers who responded to the advert to inform them that the income claims were misleading.
Aviva said that it would not be contacting customers – arguing that the majority were likely to have bought their annuities through independent financial advisers, who would have shopped around for the best rate.
Nevertheless, the provider has admitted that it has also been approached by the Financial Services Authority (FSA). “We have previously shared the data used to support the ‘up to 20 per cent’ claim with the FSA, but nothing further has been requested,” a spokesman said.
The FSA, which requires companies to ensure their promotions are fair, clear and not misleading, said it “doesn’t comment on investigations, nor confirm or deny whether an investigation is taking place”.
Aviva also declined to say whether the “up to 20 per cent” campaign had led to an increase in sales, saying the intention of the advertisement was “to encourage individuals to use the open market option and shop around for an annuity, which the government is also working with insurers to encourage”.
But Aviva’s interim management statement shows that it wrote £1.7bn-worth of individual annuity business in the third quarter of 2010 – more than in the whole of 2009.
The ASA’s sanction against the industry heavyweight comes as the FSA faces calls to tighten up the sales process for annuities, where a sale is irreversible once made.
“The FSA is asleep at the wheel,” said Dr Ros Altman, director-general, of the Saga Group. “Providers, advisers and the FSA know that most people do not understand how annuities work. More needs to be done to ensure retirees are making the best and most informed decision and not are buying on the rate but best annuity that suits their health and lifestyle.”
She added: “Annuities should come with risk warnings and using shop around should be the default option.”
Individuals now poised to buy an annuity where advised to not settle for the offer made by the pension savings provider but to use the “open market option” and shop around. Currently, only about one third of pension investors buy an annuity on the open market.
“Which? recommends you take Independent Financial Advice which looks into products from the whole market rather than simply accepting an annuity from your existing pension company,” said Mr Lindley from Which?
IFAs say that shopping around means that they are more likely to get a quote which will take into account health factors such as smoking or diabetes which could lead to an enhanced rate.
“Shopping around for a retirement income is not just a question of getting the best rate, but also considering whether to include a spouse’s pension, or escalation, or indeed considering other options such as Drawdown where appropriate,” added Laith Khalaf, pension analyst, with Hargreaves Lansdown, the independent financial advisers.
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