COBS 19.9 Pension annuity comparison information

1In this section:

1. (1)

   “guaranteed minimum pension” has the meaning in section 8(2) of the Pension Schemes Act 1993;

2. (2)

   a “guaranteed quote” is a quote that:

   1. (a)

      is provided by a firm to a retail client for the purchase of a pension annuity; and

   2. (b)

      is based on sufficient information to successfully underwrite the proposed pension annuity;

3. (3)

   a “market-leading pension annuity quote” is a quote for a pension annuity that:

   1. (a)

      is generated by a firm by searching for, obtaining and comparing, pension annuities that are available to the retail client from across all of the pension annuity market using the same information as the firm has used to generate a guaranteed quote; and

   2. (b)

      the highest annual income from amongst all of the quotes generated under (a);

4. (4)

   “pension-related benefit” means one or more of the following:

   1. (a)

      an existing or future entitlement to a guaranteed annuity rate;

   2. (b)

      an entitlement to a pension commencement lump sum that exceeds 25% of the value of the retail client’s benefit under the occupational pension scheme, personal pension scheme or stakeholder pension scheme in which the retail client has an interest;

   3. (c)

      an existing or future entitlement to a guaranteed minimum pension; or

   4. (d)

      section 9(2B) rights;

5. (5)

   “pension annuity comparator information” means the information that a firm must provide under this section;

6. (6)

   “pension commencement lump sum” has the meaning as in Part 1 of Schedule 29 to the Finance Act 2004; and

7. (7)

   “section 9(2B) rights” has the same meaning as in regulation 2(1) of the Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 20152.

This section applies to a firm that:

1. (1)

   provides a retail client with a guaranteed quote for a pension annuity; or

2. (2)

   is asked by another firm (“F”) for a quote for a pension annuity where F is seeking a quote for the purposes of generating a market-leading pension annuity quote.

When providing a guaranteed quote to a retail client a firm must use the relevant template in COBS 19 Annex 3R to provide:

1. (1)

   the following information about the features of the pension annuity that is being offered:

   1. (a)

      the cost of the pension annuity where the cost is expressed as a single sum in pounds sterling net of any adviser charges;

   2. (b)

      if applicable, the amount and details of any adviser charges that the firm will be paying;

   3. (c)

      if applicable, the amount of any commission that will be paid and to whom any such commission will be paid;

   4. (d)

      the annual income the pension annuity will provide to the retail client expressed as a single sum in pounds sterling;

   5. (e)

      whether the annual income referred to in COBS 19.9.4R(1)(d) is guaranteed for any period of time and, if so, the duration of that period;

   6. (f)

      the frequency of payments that will be made to the retail client and if such payments will be paid in advance or in arrears;

   7. (g)

      whether the pension annuity will provide an annuity to only the retail client or to the retail client and another beneficiary; and

   8. (h)

      whether the annual income offered by the pension annuity will increase in value over time and, if so, the basis upon which it will increase;

2. (2)

   if applicable, information about:

   1. (a)

      the guaranteed annuity rate that a retail client is already entitled to or will be entitled to in the future;

   2. (b)

      the date from when the guaranteed annuity rate is payable; and

   3. (c)

      the annual income that a retail client can reasonably expect to receive pursuant to the guaranteed annuity rate;

3. (3)

   if applicable, information about:

   1. (a)

      the annual income that a retail client is already, or in the future will be, entitled to pursuant to either or both a right to a guaranteed minimum pension or section 9(2B) rights; and

   2. (b)

      the date from when that annual income is payable;

4. (4)

   if applicable, information about the maximum pension commencement lump sum that the retail client is entitled to and whether that lump sum would represent more than 25% of the value of the retail client’s benefit under the occupational pension scheme, personal pension scheme or stakeholder pension scheme in which the retail client has an interest;

5. (5)

   the helpline phone number and the website address for the Money Advice Service and an explanation that the phone number and website can be used to obtain pension annuity quotes from other pension annuity providers;

6. (6)

   information about how a retail client’s health or lifestyle may entitle the retail client to a pension annuity that pays a higher income (an enhanced annuity); and

7. (7)

   the comparison information required under COBS 19.9.7R.

1. (1)

   The requirement to provide the information required by COBS 19.9.4R and the related requirement in COBS 19.9.7R does not apply to a firm:

   1. (a)

      if that firm (“F1”) is reasonably satisfied that:

      1. (i)

         the retail client has already received the information required by COBS 19.9.4R from another firm (“F2”); and

      2. (ii)

         the information provided by F2 to the retail client relates to the same guaranteed quote that F1 would otherwise use as the basis for providing the information required by COBS 19.9.4R; or

   2. (b)

      in any case where a firm, during the same telephone conversation, provides a retail client with more than one guaranteed quote.

2. (2)

   Where (1)(b) applies, a firm must comply with COBS 19.9.4R if:

   1. (a)

      the retail client, during the same telephone conversation, selects one of the guaranteed quotes to explore further; or

   2. (b)

      the retail client subsequently contacts the firm to explore further one of the guaranteed quotes (“Q1”) that the firm has previously provided where Q1 was not, at the time it was provided, accompanied by the information required by COBS 19.9.4R.

A firm must:

1. (1)

   generate a market-leading pension annuity quote before providing a guaranteed quote to a retail client;

2. (2)

   determine which of the following will, or is most likely to, offer a retail client the highest annual income:

   1. (a)

      the pension annuity offered by the guaranteed quote (“A”);

   2. (b)

      the pension annuity offered by the market-leading pension annuity quote (“B”);

   3. (c)

      if applicable, the pension that a retail client is entitled to, or will be entitled to, pursuant to the retail client’s entitlement to a guaranteed annuity rate (“C”); or

   4. (d)

      if applicable, the minimum pension that a retail client is entitled to, or will be entitled to, pursuant to the retail client’s entitlement to either or both a guaranteed minimum pension or section 9(2B) rights (“D”);

3. (3)

   use the template in:

   1. (a)

      Part 1 of COBS 19 Annex 3R where B offers a retail client the highest annual income; or

   2. (b)

      Part 2 of COBS 19 Annex 3R where A, C or D offers a retail client the highest annual income;

4. (4)

   where B offers the highest annual income:

   1. (a)

      calculate as a single sum in pounds sterling the amount by which B provides a higher annual income than A;

   2. (b)

      include that amount in the relevant place in the template; and

   3. (c)

      include a statement making it clear that a retail client could obtain a higher annual income by searching the open market for a pension annuity;

5. (5)

   where A offers the highest annual income, include a statement that A will provide the retail client with the highest annual income; and

6. (6)

   if applicable, where C or D will, or is likely to, provide the highest annual income:

   1. (a)

      calculate as a single sum in pounds sterling the amount by which C or D, as applicable, will, or is likely to, provide a higher annual income than A;

   2. (b)

      include that amount in the relevant place in the template; and

   3. (c)

      warn the retail client that:

      1. (i)

         the entitlement to, as applicable, C or D, will be extinguished if the retail client accepts A; and

      2. (ii)

         accepting A will result in the retail client receiving a lower annual income than the retail client is entitled to pursuant to, as applicable, C or D.

A firm (“F1”) must take reasonable steps to provide any information requested of it by another firm (“F2”) where such information is requested in order for F2 to comply with its obligations under COBS 19.9.4R(7) and the related requirement in COBS 19.9.7R.

1. (1)

   This rule applies if a retail client is entitled to a pension commencement lump sum that would amount to more than 25% of the value of the retail client’s benefit under the occupational pension scheme, personal pension scheme or stakeholder pension scheme in which the retail client has an interest.

2. (2)

   A firm must warn the retail client if the pension annuity offered by:

   1. (a)

      the guaranteed quote; or

   2. (b)

      the market-leading pension annuity quote,

will, if accepted, reduce the pension commencement lump sum that a retail client would otherwise be entitled to receive.

1. (1)

   This rule applies where a retail client is unable to confirm an entitlement to a pension-related benefit.

2. (2)

   This rule does not apply if a firm is the retail client’s current provider of a pension-related benefit.

3. (3)

   A firm must take reasonable steps to assist a retail client ascertain whether the retail client is entitled to a pension-related benefit.

4. (4)

   If, despite having taken reasonable steps under (3), it remains unclear whether a retail client:

   1. (a)

      is entitled to a guaranteed annuity rate, a firm must proceed as if the requirement in COBS 19.9.4R(2) is not applicable;

   2. (b)

      is entitled to a guaranteed minimum pension, a firm must proceed as if the requirement in COBS 19.9.4R(3) relating to information about a guaranteed minimum pension is not applicable;

   3. (c)

      has section 9(2B) rights, a firm must proceed as if the requirement in COBS 19.9.4R(3) relating to information about section 9(2B) rights is not applicable; or

   4. (d)

      is entitled to a pension commencement lump sum, a firm must proceed as if the requirement in COBS 19.4.4R(4) is not applicable.

1. (1)

   This rule applies to a firm where the firm requires the retail client’s consent to the firm generating, on behalf of the retail client, a market-leading pension annuity quote and that consent is not obtained.

2. (2)

   A firm must take reasonable steps to obtain a retail client’s consent.

3. (3)

   Where this rule applies:

   1. (a)

      COBS 19.9.4R(7) and COBS 19.9.7R do not apply;

   2. (b)

      a firm must include information warning the retail client that a higher annual income might be obtained by searching the open market for a pension annuity; and

   3. (c)

      a firm must use the template in Part 3 of COBS 19 Annex 3R to provide the applicable pension annuity comparator information.

1. (1)

   A firm must provide the pension annuity comparator information in a durable medium or make the information available on a website (where that does not constitute a durable medium) that meets the website conditions.

2. (2)

   If the requirement to provide the pension annuity comparator information arises during a telephone conversation with a retail client, a firm must:

   1. (a)

      orally provide the pension annuity comparator information over the telephone;

   2. (b)

      provide the pension annuity comparator information in a durable medium or make the information available on a website (where that does not constitute a durable medium) that meets the website conditions; and

   3. (c)

      conclude a sale of a pension annuity only if the retail client agrees to receiving the pension annuity comparator information referred to in (b) after the sale has been concluded.

3. (3)

   If a firm provides the pension annuity comparator information on paper, it must use a single sheet of A4 paper.

4. (4)

   The requirement in (3) to use a single sheet of paper does not apply if a retail client asks for the pension annuity comparator information to be provided in an accessible format and the fulfilment of that request will necessitate the use of more than a single sheet of A4 paper.