The Pru fined £24m over not revealing best pension deals
FAILING to tell savers they could get a better pension deal elsewhere has cost the Prudential £24million.
Neglecting to pass on crucial advice which could have added thousands of pounds to people’s pension pots resulted in the financial watchdog imposing the huge fine yesterday.
The Financial Conduct Authority found that the company offered its staff sales-related bonuses worth 40 per cent on top of salaries and incentive schemes which included spa breaks and holidays.
It found that the Pru’s call handlers “might have put their own financial interests ahead of ensuring fair customer outcomes” as they competed for the bonuses.
It found that more than 17,000 savers were not given the right information.
The life insurance giant has set aside £110million to repay customers.
Most savers affected have already been contacted.
The “very serious” failures are over those customers who bought annuities – products which pay an income for life – without the help of a financial adviser, between July 2008 and September 2017.
The FCA said Prudential was aware that many customers it sold annuities to could get a better deal by shopping around but it “failed to ensure that customers were consistently informed”. Most at risk were pre-2013, when the life insurance giant operated a bonus scheme which it has since cancelled.
The FCA also said the Pru did not make sure its call handlers had “appropriate documentation to support customers” and “failed to monitor calls with customers properly”.
The complexity and poor value of annuities, as well as the failure of many customers to compare deals, mean insurers are now required to explain to savers that they may get a better rate if they shop around.
Mark Steward, at the FCA, said: “Prudential failed to treat some of its customers fairly. They could have secured a better deal on the open market. These are very serious breaches that caused harm to those customers.
“Prudential is focused on redress and today’s financial penalty reinforces the obligation of fairness firms owe to customers.” An annuity is a guaranteed income for life bought with a pension pot. Accurate information is crucial as a decision to buy the annuity cannot be changed.
This is especially so for “non-advised sales” where the saver does not receive financial advice.
Prudential said: “We are deeply sorry for the historic failings in our non-advised annuity business and any detriment this has caused our customers.
“We are on schedule to offer redress to the vast majority of affected customers by the end of October.
“Our systems and controls have been significantly strengthened in the past two years through a substantial investment in our business.”
Since pension freedom changes in 2015, annuities have become less popular.
FINANCIAL institutions in the past often ran roughshod over customers. A particularly egregious example has just emerged in Prudential, which failed to tell its clients who bought annuities without a financial adviser between 2008 and 2017 that they could get a better pension deal elsewhere, and operated a cutthroat bonus culture which rewarded hard selling.
The insurance and finance giant has now incurred a huge £24million fine from the Financial Conduct Authority and has been forced to compensate 17,000 savers who were kept in the dark.
It’s a lesson for aggressive sales tactics that compete for bonuses, a coda to the now concluded PPI scandal, and it bodes ill for unscrupulous finance companies seeking to exploit complexity by hoodwinking loyal customers. Good work, FCA – and a well-deserved slap for the Pru.
Mark Steward from the FCA