The FCA has found “specific material problems” among a number of providers following its thematic review of the £900bn unit-linked fund sector.
The review, published last week, focused on 12 major firms and found cases of poor oversight of outsourced services, insufficient controls over what unit-linked funds were investing in and pricing errors.
In some cases, firms were required to carry out a skilled persons report, or past business review, to assess whether customers had lost out and were due compensation. A spokesman for the FCA says it is too early to say how much compensation is due as firms’ reviews have not yet been completed.
As a result of the review, the Association of British Insurers is to revise its guidance for the unit-linked industry to clarify good practice.
The review identified failings in the oversight of outsourcing in half of the firms in its sample. It also found that half of the firms reviewed could have compensated customers more quickly, or moved faster to correct errors, such as those relating to unit pricing.
The review was launched in January to ensure sufficient protection for customers’ investments, given the introduction of auto-enrolment and that 85 per cent of the funds invested in unit-linked funds is pension savings.
The FCA says: “We found no material issues evident throughout our sample of firms that posed a serious threat to customers’ investments. We did, however, find specific material problems in individual firms which, if left unchecked, could have led to customers being disadvantaged.”
Page Russell director Tim Page says: “Over the years there have been some dark murmurings about what happens operationally with unit-linked funds in large life companies, so I am pleased the FCA has looked at this sector, and relieved to hear there are no huge systemic problems.”