Royal & Sun Alliance shareholders will be left to pick up the £1.35m fine imposed on the life office by the FSA for its second offence under the pension review.
The penalty is the biggest ever for pension misselling, more than doubling the £650,000 fine on Prudential last October.
R&SA allowed 13,500 cases with a potential £32m of redress to slip through the net even though it had been fined £225,000 by the PIA for pension review failings in 1997.
The 13,500 reviewable cases, which relate to pensions sold by its direct salesforce and tied agencies, were only identified two years after R&SA's deadline for completion of all phase-one cases.
In August 2000, Deloitte & Touche was called in to help the firm with the review after the FSA identified systematic failures in the review by R&SA.
The penalty is the fourth-biggest regulatory fine, exceeded only by Royal Scottish Assurance which was fined £2m in November 2000, Morgan Grenfell which was also fined £2m in April 1997, and GLMP, formerly GAN, which was fined £1.4m in November 2001.
The FSA blamed “limited evidence of effective management control” and “weak monitoring” of the review for the failure by R&SA to pick up 23 per cent of reviewable cases.
The fine comes at a bad time for R&SA chief executive Bob Mendelsohn who has been facing calls for his resignation after the company closed to new life and pension business and axed 1,200 jobs this month.
FSA managing director for regulatory processes and risk Carol Sergeant says: “This is a significant penalty to reflect the serious nature of R&SA's past failings in its handling of the review. The responsibility for delivering redress rests with senior management, who must ensure proper control and monitoring of such work.”
R&SA UK life operations director Phil Egan says: “There were shortcomings when we determined the reviewable population. This issue will have no bearing on Bob Mendelsohn's position.”