Standard Life Assurance fined £30m for annuity sales failures

Standard Life Assurance has been fined £30 million by the City regulator for failures relating to sales of retirement annuities which created risks staff would put their own financial needs ahead of their customers.

Standard Life Assurance Limited (SLAL) failed to adequately monitor the quality of the calls between its call handlers and non-advised customers, the Financial Conduct Authority (FCA) said.

At the same time, frontline staff were offered large financial incentives to sell annuities – guaranteed incomes that people buy with their pension pots when they retire.

The FCA said this gave rise to a significant risk that SLAL’s call handlers would fail to provide customers with the information they needed to choose an appropriate annuity.

Bonuses and rewards systems meant that during the period of misconduct, nearly 22% of call handlers received more than 100% of their basic salary in bonus payments.

Between 2011 and 2013, at the peak of the misconduct, there was a sales strategy known as the “annuities challenge”, the FCA said.

An aim was to increase profits on annuity sales by offering an incentive to existing customers choosing to consolidate their Standard Life pension pot with external funds into a Standard Life annuity.

The firm failed to provide some customers with appropriate information about shopping around for a better deal in some cases.

Where customers have health or lifestyle factors which may shorten their life expectancy, they may be eligible for an enhanced annuity – which could mean a better rate.

The FCA said SLAL used “high level” call guidelines which gave call handlers significant discretion about how they communicated with customers.

This meant that the firm failed to provide some customers with appropriate information about enhanced annuities, including the option to shop around for a better deal.

In January 2017, SLAL voluntarily agreed to conduct a past business review to identify and pay redress to customers who were likely to have suffered, or did suffer, loss as a result of its failures.

By the end of May 2019, SLAL had paid around £25.3 million to 15,302 customers.

Based on payments made to date, the estimated total redress payable will be around £61.2 million, the FCA said.

This covers back-payments and interest paid to affected customers to put them in the position they would have been in had they bought an enhanced annuity.

SLAL will continue to make payments to affected customers at the enhanced rate for the remainder of their lives in accordance with the terms of their annuity policies, and has set aside additional reserves to cover future payments.

Imposing a fine of £30,792,500, the FCA said customers require accurate information when choosing an annuity – a complex financial product.

It said: “This is especially so for non-advised sales, where the customer selects the annuity based on factual information and does not receive financial advice.”

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Standard Life Assurance Limited’s controls needed to place fairness to customers at their heart.

“Here, the financial incentives available to staff for selling non-advised annuities by telephone created conflicts which led to unfair outcomes for some customers. Firms must have controls in place to ensure they are prioritising fairness to customers.”

SLAL was formerly part of the Standard Life Aberdeen group of companies but in August 2018 it was sold to the Phoenix Group.

SLAL’s past business review is ongoing under the ownership of the Phoenix Group and the firm expects to complete it by the end of 2019.

Concerned customers who bought a non-advised annuity may contact SLAL, as a member of the Phoenix Group, directly.

SLAL did not dispute the FCA’s findings, which meant it qualified for a 30% discount.

Otherwise the FCA would have imposed a financial penalty of £43,989,300.