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Standard Life faces redress bill of up to £125m over annuity review

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Standard Life may have to pay out up to £125m as part of its review of non-advised annuity sales.

The provider has said it is carrying out a review of all non-advised annuity sales from July 2008 to investigate whether customers were given enough information about the ability to take out an enhanced annuity.

It follows a review of 1,200 non-advised sales at seven firms by the FCA, which found providers were failing to inform customers they may qualify for an enhanced annuity.

Last week the FCA said a “small number” of firms were being investigated by its enforcement team.

The Herald reports an analyst note from investment banking firm Jefferies put the cost of redress to Standard Life at around £125m.

Prudential is estimated to face a compensation bill of £200m, though the insurer has not said whether it will be reviewing its sales.

Jefferies equity analyst Anasuya Iyer says: “Standard Life sold around 150,000 annuity policies over the July 2008 to April 2015 period worth £2.4bn of annuities, nearly all of which are non-advised sales.

“Over the period [Prudential] sold around £8.6bn worth of UK annuities, where around 55 to 60 per cent were non-advised, non-guaranteed on our estimate, equating roughly to 160,000 customers.”

A Prudential spokesman told Money Marketing: “We never comment on regulatory processes and this is no exception.”

Other providers have also sought to distance themselves from the review.

An Aegon spokesman says: “We’ve not been asked and there’s no suggestion from the FCA of taking this any further. The only communications we have had have been very generic and not about looking into past sales practice. We don’t believe we are in scope for any further review.”

A Zurich spokeswoman says: “We note the outcome of the FCA’s industry-wide review and continue to focus on delivering good customer outcomes, placing the interests of our customers at the heart of our business.”

An Aviva spokesman says: “We welcome the announcement from the FCA. However, we don’t comment on the detail of our conversations with the regulator.

“Our work is primarily focused on supporting further future improvements to the market, rather than on retrospective action. We don’t anticipate having to take any significant retrospective action.”

Royal London says it has not been asked to review annuity sales, though FCA may yet do so.

Legal & General did not respond to requests for comment.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. The next PPI?

    Non-advised commission was always a clear (significant) risk to consumer detriment however, this should (in theory) be a grey area given that no advice was being given.

    Product providers at times try cut out the adviser and, in the past, product sales teams have used the fact IFAs ‘charge fees’ – even if they didn’t (i.e. Pre-RDR) – as a reason not to seek advice.

    Post RDR a number of firms stepped out of the advice market but they are now coming back in.

    Consumers generally do not understand the difference between independent / tied (?sold) / non advised / regulated / unregulated. Only once this is addressed will the frequent detriment to consumers by those who are simply in it for short term gains (i.e. the next profit centre!) begin to be addressed.

  2. Not surprising. Ever since they reinvented themselves as an asset manager they have adopted a hard sell ethos. I well recall asking for a Stakeholder quote and arguing for 10 minutes that I didn’t want the alternative they were so insistent in pushing.

    Their policy is also bereft of logic. I wanted to take the PCLS from an older pension. Not possible, you have to transfer to one of our newer plans and we will charge you £500 for the privilege. OK so how much is the penalty if I transfer the lot to another provider. Nil was the response. Work that out as a business plan.

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