LONDON Jan 31 Insurers Standard Life and
Resolution are most at risk from a British regulatory
probe into whether retirees who buy annuities - investment
policies that provide a regular income until death - get a fair
deal, analysts said.
The investigation by Britain's Financial Services Authority
will focus on whether people who buy an annuity directly from
their pension provider pay more than they would if they shopped
around, the watchdog said on Thursday.
The regulator will also look into whether insurers hinder
their customers from shopping around. The industry is obliged
under FSA rules to inform pension savers that they have a right
to compare annuity rates across the market.
"We want to understand the level of the potential detriment
for consumers if they do not shop around, to see if there are
ways to make this market work better for customers," said FSA
head of life insurance Nick Poyntz-Wright.
If it finds that consumers who buy annuities from their own
pension provider are paying over the odds, the FSA will take
"steps to ensure fairer pricing", a spokeswoman said.
Resolution and Edinburgh-based Standard Life
sell annuities mainly to their own pension customers, and
therefore potentially have the most to lose from the probe,
"A successful FSA investigation would logically impact on
those companies primarily selling only to their in-house
customers," Deutsche Bank's Oliver Steel wrote in a note to
clients. "There is a risk that in-house annuity providers such
as Standard Life and Resolution lose out."
There is an income gap of up to 16.2 percent between the
most and least competitive annuities currently available for 65
year-old retirees, financial data firm Moneyfacts said.
The FSA inquiry comes amid a prolonged decline in average
annuity incomes as insurers pass on a drop in the returns they
make on their investments in government bonds.
The average annuity payout fell 11.5 percent last year
alone, and has dropped by 56 percent for male annuitants since
1994, according to Moneyfacts.
Shares in Standard Life and Resolution were down 0.6 percent
and 0.5 percent by 1145 GMT, in line with the FTSE 100 share