The Pru fined £24m over not re­veal­ing best pen­sion deals

Daily Express - - NEWS - By Sarah O’Grady So­cial Af­fairs Cor­re­spon­dent

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

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