Prudential fined £23,875,000 for annuities sales failings
Prudential has been fined £23,875,000 for failures meaning it did not treat some annuity customers fairly.
The Financial Conduct Authority (FCA), which imposed the fine, said the failures related to non-advised sales of annuities.
People can use their pension pot to buy an annuity, which gives them a regular retirement income.
But the FCA said Prudential failed to ensure that customers were consistently informed that they may get a better deal if they shopped around.
Prudential has already contacted the vast majority of potentially affected customers as part of a past business review, the regulator said.
As of September 19, Prudential has offered around £110 million in redress to 17,240 customers, including ongoing annuity uplifts, the FCA said.
Between July 2008 and September 2017, Prudential’s non-advised annuity business had focused on selling annuities directly to existing Prudential pension holders.
Firms are required to explain to customers that they may get a better rate if they shop around on the open market and Prudential was aware that many customers could get a higher income in retirement by shopping around, the FCA said.
But it failed to ensure that customers were consistently informed that they may get a better deal if they shopped around and did not take reasonable care to organise and control its affairs in breach of its obligation to ensure fair treatment of customers.
Prudential failed to ensure documents used by call handlers was appropriate and did not monitor calls with customers properly.
The FCA said there was a “significant risk” that call handlers would fail to mention the open market option or make statements during calls which could discourage a customer from shopping around for a better deal.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Prudential failed to treat some of its customers, who could have secured a better deal on the open market, fairly.
“These are very serious breaches that caused harm to those customers.
“Prudential is now rightly focused on redress and today’s financial penalty reinforces the cardinal obligation of fairness that firms owe to customers.”
The FCA said customers need accurate information when choosing an annuity, because it is a complex financial product and can affect the customer, and their dependants, for life.
This is especially so for non-advised sales, where the customer selects the annuity based on factual information and does not receive financial advice.
People with conditions which may shorten their lifespan may be eligible for enhanced annuities, which tend to have better rates.
The regulator said firms need to provide clear, fair and not misleading information about enhanced annuities to help the customer make an informed decision about which product to buy.
Prudential did not dispute the FCA’s findings and it qualified for a 30% discount.
Were it not for the discount the FCA would have imposed a fine of £34,107,200.