The sale of variable annuities and advice given to consumers will be closely scrutinised to limit potential mis-selling, a European Union (EU) pension body says.
A European Insurance and Occupational Pensions Authority (EIOPA) concluded the retirement products - unit-linked investment products with explicit guarantees - must only be sold to consumers by qualified advisers.
The report outlined good practices for disclosure and selling of variable annuities.
EIOPA chairman Gabriel Bernardino said the report was a step towards greater consumer protection and the situation would be closely monitored.
He added: "With this report EIOPA is fulfilling its role in promoting transparency, simplicity and fairness in the insurance market.
"I do expect that insurance companies will seriously take into consideration these good practices and incorporate them in their practices of the variable annuities disclosure and selling. From our side we are going to closely monitor and review this issue in the following years."
EIOPA said "selling should always be based on advice by suitably qualified salespersons".
It added customers need to be informed on how the product workers under different market conditions, what the charges are and what options they can take during the contract.
General information on product provider, the law governing the contract and details of relevant regulators must also be provided.
The report added insurance companies should ensure adequate sales by carrying out a due diligence on the intermediary firms as well as reviewing the clients they have taken on.
Consultant Towers Watson reported sales of variable annuities in the UK exceeded £500m last year.
Variable annuities are currently available from a small number of providers, either as a pension or as a life assurance (investment) bond.
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Avoidance, evasion and non-compliance
From 6 April 2019