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Pru sets aside £175m for non-advised annuity review

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Prudential has revealed it has set aside a total of £175m to cover the cost a review of non-advised annuity sales and potential redress.

In its annual results, published today, Pru says the provision has contributed to lower operating profits for the UK business, down 31 per cent to £828m.

Money Marketing revealed last month that Pru had agreed with the FCA to carry out a past business review into whether non-advised customers were given sufficient information about the option for an enhanced annuity.

Standard Life is carrying out a review of its non-advised annuity sales and has also set aside £175m to cover the costs.

Pru says: “The FCA’s thematic review of non-advised annuity sales practices showed that, in a portion of annuity sales that the UK business made since July 2008, it was not adequately explained to customers that they may have been eligible for an enhanced annuity.

“We are continuing to work to ensure we put things right.”

Separately, Pru says its advice arm Prudential Financial Planning has now become a top 10 UK advice business, with the number of adviser firms up 37 per cent since 2013.

M&G, Pru’s fund management division, saw operating profits fall 4 per cent last year from £442m to £425m.

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

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. When you ring these types of call centre, usually it is quite clearly stated that then operative cannot give advice and you proceed on that basis.
    Now they must pay for their non regulated operators not giving advice that they weren’t qualified to give anyway.
    Feckless individuals who can’t be bothered to take responsibility for their own decisions, or are too lazy to investigate their options, are now to get a free hand out yet again.

  2. Stuart Percival 14th March 2017 at 12:13 pm

    Paul Barnard, there is a difference between advice and making a client aware of their options. Just to proceed on the basis of “the clients have called and that’s what they’re getting” doesn’t ring TCF to me

  3. Whilst Stuart is right from a TCF perspective, it’s a massive grey area IMO as Pru are acting as a product provider and therefore where would the risk warnings stop and, furthermore, where does perceived advice start?

    Taking this one step further, should they encourage advice – perhaps insist on it – as I’ve yet to arrange an annuity where, net of our advice fees, the client’s income isn’t higher than going direct to their current provider.

    Finally, I ‘competed’ post RDR with a tied annuity firm charging circa 4% to set up an annuity on a commission basis without considering the clients health, no personal contact and leaving the client to do all the paperwork. Should they therefore point the client to a firm like us who would charge a much lower fee, search the whole market, factor in health, deal with all paperwork AND meet them in person.

    There are lots of creases in regulation and legislation and many firms unfortunately take advantage of it – typically if there’s a sudden growth in a certain area, IMO it’s not because its in the client best interest for this area to be served – it’s more because they are taking advantage of these opportunities.

    Cynical perhaps, but the rate at which providers enter and exit advice markets seemingly to reflect current trends lead me to think they’re after the next cash cow rather than the next client.

  4. The root of this issue is not so much mis-selling as a lack of regulatory action to prevent insurers from allowing consumers to buy the wrong product, namely their own uncompetitively priced in-house annuity. Surely, were it only half on the ball, the FSA could have headed off this issue by issuing and then policing clear instructions to providers that they must make absolutely clear to consumers that the rates on which their own annuities are based may not be the most competitive in the market, particularly for those with health issues, and strongly urging them to seek independent advice. Any consumer intent on not bothering to do so and simply opting for the provider’s own annuity, having been clearly informed that better terms may be available in the OM would be required to sign a statement to that effect. How difficult can it be? This seems to be yet another failure of regulation, albeit that certain providers are to blame for having taken advantage of it.

  5. I’m in two minds on this one. I see both Paul Barnard’s point and Paul Stocks. What I would say however is that these sorts of annuity arrangements by telephone are invariably recorded (and most calls will be post MIFD, we’re going to use BT’s cloud system instead of our current one). As such, the FCA could have listened to a random selection of calls and so could Pru’s compliance to make sure the whole process was fair. To do this now, nearly 10 years after they say the problems started shows regulatory failure yet again….. This isn’t a small firm, this is a big firm and they should have picked up any problem much sooner.
    Or is there NO problem, it’s just making work for mandarins and as someone else said, just a tax on the Pru & Std Life?

  6. Three words ….Restriction of trade….

    What an industry we work in where a company can’t sell or advise on its “own” products with out fear of 175 million cost for stupid skilled persons reprots (s166) and fines and redress on top ?

    Short of walking hand in hand with said client round every provider on the high street, sitting them down for 4 hours to run through every concivable option and senario, whats a company to do ?

    One as to wonder whether the (shareholders and directors) Pru, Standard Life, et al are not thinking to themselves ” do you know what, we are fed up with this constant unreasonable behaviour from bureacrats lets just pack up and go home or else where”

    And what redress will the Pru or S Life get if this PBR comes back clean or with very minor issues ? they will have just thrown £175 million straight down the drain because of some bureacrats power stance at the FCA ! and moving on there is the question of PI premiums we know where that will go straight through the roof !

    Then you have the client…… I have lost count over the years when I ask, do you smoke; (in relation to annities) ? 99% of the time the answer is no ….. now I am sat in there living room and know full well they smoke because of the smell and the packet of 20 on the side of there chair……….how the hell do you work this out over the phone ? are you covered if you just ask the question ? or will you be criticized for not being serching enough in you questions ?

    You just cant win in a game where the goal posts and rules change to suit someone like the FCA

  7. How much information can you give without it being deemed to be advice.

    Also an annuity, (enhanced or not) is an option for every policyholder post 55.

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