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Pru agrees with FCA to carry out non-advised annuities review

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Prudential has revealed it is carrying out a review of non-advised annuity sales alongside Standard Life following an FCA inquiry.

Standard Life revealed this morning it had set aside £175m as part of its past business review.

Pru has also announced that following discussions with the FCA, it too is carrying out a review involving members of contract-based defined contribution schemes into whether they were given sufficient information about the option for an enhanced annuity.

The review will cover non-advised annuity sales from 1 July 2008 where net pension pots were worth £5,000 or more. Pru will contact any affected customers directly if the review finds they are eligible for redress.

In October, an analyst note from investment bank Jefferies put the potential cost of compensation from the review at £200m.

In a statement posted on the company website, Pru says: “Prudential UK & Europe wishes to advise its customers that it has agreed with the FCA to review annuities sold without advice after 1 July 2008 to its contract-based defined-contribution pension customers.

“The review will examine whether these customers were given sufficient information about the availability of, and their potential eligibility for, enhanced annuities.

“The review will also look at whether these customers could have potentially received a higher income from Prudential or another provider. In due course Prudential will contact customers who may not have been given sufficient information and will provide redress, where appropriate.”

Last year the FCA said a small number of firms were in enforcement following a review of 1,200 non-advised sales at seven firms.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. I am obviously totally naive here. How can non-advised sales possibly have any form of potential redress? Surely the annuitant acted on their own decision and as such have no recourse? The world has now gone absolutely bonkers IMHO

    • If the department is set up to incentivise staff to sell one product (rollover annuity) over another (arrange OMO for example), this is clearly wrong. It would be wrong for advisers to have such a culture, but what chance has a customer got when this practice happens with non advised sales.

  2. “Agreed” rather suggests that Prudential were given a choice. What if it has disagreed?

    That aside, I wish MM (and others) would call these reviews what they are, namely (by) hindsight. The only reason the FCA describes them as “thematic” is a shabby attempt to disguise the fact that for the eight years (EIGHT YEARS, FFS) over which these unsatisfactory practices were going on, the FSA was, as we’ve seen so often, looking the other way. All part of what Andrew Bailey described as its “sorry history” (of regulatory negligence, incompetence and mis-prioritisation).

  3. In respect of non-advised sales, an enhanced annuity is not an option with every company, but surely a more important area to look is the ability,(but not offered) to take, before Pensions freedom, a cash sum for a small value pot (less than £10,000), rather than getting a measly annuity, which would be small change in 10/15 years.
    The administration of small annuities is a costly thing!

  4. So I wonder if Parky and all are now sweating on the back of his Sun Life adverts? It’s not really any different in principle. Some people don’t want to pay or just can’t be bothered so end up being sold to. There used to be a pertinent legal phrase which was buyer beware.

    Financial caveat emptor has no place seemingly.

  5. In any other world, if you buy something but don’t ask for advice, you are expected to do the research yourself – in this world if you don’t get advice you’re still expected to be told of other options and factors that can impact your choice….imagine if the same applied to cars, beds, houses, food, etc etc etc

  6. Ah, the good old FCA. With annuities, it’s basically compelling providers to point customers towards either their least profitable profitable products or their competitors’ products. And any provider who doesn’t do this to their satisfaction is at threat of action. No wonder there have been some exits from the annuity market! Can you imagine this approach being applied in other industries? Walk into a car showroom and the salesman has to tell you that the garage down the road has the same one cheaper!

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