The FCA has announced that it is currently finalising arrangements which would mean one in four savers who retired in the past six years and were mis-sold an annuity could claim redress.

An FCA investigation into annuities selling last year revealed that providers often failed to assess a retiree’s circumstances properly, and alert savers to more suitable, higher-paying products for which they qualified. As a result, in the past seven years, more than 600,000 people are estimated to have used their pensions to purchase inappropriate, poor-value annuities. The FCA project that many savers qualified for a third more income than they actually received; for instance, those who invested £100,000 in an annuity six years ago could be owed between £23,000 and £56,000.

The FCA is now considering whether to legally obligate insurance companies to contact affected customers and invite them to submit a claim, and whether compensation rate should be fixed, or left to providers to calculate.

Either way, however, the FCA believes that impacted savers stood a “60 to 70 per cent” chance of winning compensation in court. Andrew Willoughby of law firm BT3, specifically founded to represent mis-selling claimants, believes “courts would force insurers to pay a cash lump sum covering the missing income, plus 8 per cent annual interest, at a bare minimum.”

“If it can be demonstrated that a provider failed to properly advise on available annuity options, or ask appropriate questions means that the pension provider is liable.”