Prudential fined £24m over non-advised annuity sales

The Financial Conduct Authority (FCA) has fined Prudential Assurance Company nearly £24m for failures relating to non-advised annuity sales.

Prudential incurred the £23.875m fine for failing to ensure that customers were informed that they may get a better deal if they shopped around for their annuity purchase.

Between July 2008 and September 2017, Prudential’s non-advised annuity business focused on selling annuities directly to Prudential pension holders.

However, firms are required to explain to customers that they may get a better rate if they explore the open market.

The FCA said that Prudential “was aware that many customers could get a higher income in retirement by shopping around”.

It also found that Prudential had failed to take “reasonable care” to organise and control its affairs in breach of its obligation to ensure fair treatment of customers.

Furthermore, the firm did not ensure that documentation used by its call handlers was appropriate and it failed to properly monitor customer calls.

Commenting, FCA executive director of enforcement and market oversight, Mark Steward, 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 focussed on redress and today’s financial penalty reinforces the cardinal obligation of fairness that firms owe to customers.”

Before 2013, call handlers had sales-linked financial incentives when speaking to annuity customers, meaning that they there was encouragement to put their own financial interests ahead of their customers financial wellbeing.

Prudential then failed to monitor the calls or provide documentation to call handlers that created “significant risk” that they would fail to mention shopping around to receive a better deal.

Similarly, Standard Life was fined £30m in July 2019 for failures relating to monitoring calls and offering staff incentives to sell annuities.

Prudential voluntarily agreed to conduct a past business review of non-advised annuity sales in order to identify any customers who may be entitled to redress as a result of the firm’s failures. As of 19 September 2019, Prudential has offered approximately £110m in redress to 17,240 customers.

Prudential did not dispute the FCA’s findings. The firm’s agreement to accept the FCA’s findings meant it qualified for a 30 per cent discount.

Were it not for this discount, the FCA would have imposed a fine of £34.1m.

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