Skipton Building Society’s advice businesses have made a combined £12m provision for customer redress relating to an investment advice past business review.
In February, Skipton revealed it would set aside £5.6m to cover both redress and commission rebates to investors for fund underperformance.
Some £3.3m of this related to funds under its “Monitored Informed Investing” proposition, whereby customers are offered a rebate on ongoing charges if a fund underperforms against its peers.
Skipton says the remaining £2.3m provision followed a past business review which focused on the documentation of investment advice at SFS and its other advice subsidiaries.
This was a net provision, however, meaning it only set out the difference between the amount Skipton expects its professional indemnity insurer to pay out and the estimated size of the total complaints provision.
The full SFS accounts, published on Companies House last week, reveal the firm has made a £9.1m provision relating to the investment advice review. Of the £9.1m, SFS estimates £7.8m will be covered by its professional indemnity insurance.
However, a Skipton spokeswoman says the total provision across SFS and the building society’s other advice subsidiaries is £12m.
She says the “majority” of the £12m is covered by Skipton’s PI insurance.
A statement in the SFS 2012 accounts says: “Included within the investment advice provision is a gross provision of £9,149k (2011 nil) relating to a past business review.
“Provisions in relation to past business reviews are determined using a risk based approach to identify the potential population of clients impacted by the review.
“Compensation payments are estimated based upon historic levels of compensation or management’s best estimate of the likely settlement per case.”
The firm’s accounts also reveal a pre-tax loss of £1.26m for the year to 31 December 2012, compared with a profit of £2.85m in 2011.
In July, SFS posted pre-tax profit of £500,000 for the first six months of 2013, compared with a £500,000 loss in the corresponding period during 2012.