The Financial Services Authority (FSA) has fined Scottish Equitable £2.8 million for administrative problems including incorrectly calculating guaranteed minimum pension payments and future benefits of 774 customers, the Authority has announced.

Scottish Equitable is the legal name for AEGON’s UK life and pensions business, which now trades under the AEGON brand. In 2009, the company informed the FSA that it had identified ‘around 300 issues’ relating to problems in administering its policies.

According to the FSA, problems included failing to identify errors in calculating rebates to charges on pension policies for 25,000 policies, not matching Department of Work and Pensions contributions to personal pensions for around 2,500 customers, and failing to trace around 200,000 policyholders who had moved without informing Scottish Equitable of their new address.

The total consumer detriment is estimated to be £60m, and the FSA says Scottish Equitable is undertaking a redress programme to compensate customers. The company has already started to compensate consumers and will have paid £30m in redress by the end of 2010.

Scottish Equitable qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £4m, the Authority said. The FSA also took into account that Scottish Equitable co-operated with the FSA and has committed substantial resources and time to rectifying the issues identified.

In a statement, AEGON said it is on target to resolve all five of the issues specifically examined by the FSA by the end of April, and expects the bulk of the remainder of the programme to be completed by the end of 2011.

The company said it has ‘co-operated fully’ with the FSA. AEGON said it is committed to ‘resolve all related issues’, and has put in place ‘stronger, more stringent controls’ to prevent similar issues occurring in the future.

“AEGON sincerely regrets that some customers have suffered financial detriment or inconvenience. Its redress programme aims to resolve all the issues as quickly as possible and is a top priority for the firm,” the company said.

FSA managing director of enforcement and financial crime Margaret Cole said the redress package is ‘significant news’ for Scottish Equitable customers, and that the fact £30m will have been paid back by the end of the month is pleasing.

“This case shows the importance of getting customer administrative procedures right and fixing them quickly when they go wrong. This is a key part of treating customers fairly,” Cole said.

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