The Financial Conduct Authority has penalised Prudential for failing to ensure that customers were made aware they could get a better annuity rate by shopping around on the open market.
The £23,875,000 ($29.3m, €26.8m) fine would have been more than £34m had Prudential not qualified for a 30% discount by agreeing to accept the regulator’s findings.
Prudential is conducting a business review to identify non-advised customers who may be entitled to redress.
As of 19 September, it has offered around £110m to 17,240 customers.
It follows similar action taken against Standard Life Assurance, which was hit with a nearly £31m fine for the same customer failing.
Strengthened controls
A Prudential spokesperson said: “We are deeply sorry for the historic failings in our non-advised business and any detriment this has caused our customers.
“We are working hard to put this right and are on schedule to offer redress to the vast majority of affected customers by the end of October this year.
“Our systems and controls have been significantly strengthened in the past two years through a substantial investment in our business.
“Prudential no longer sells non-advised annuities to most of our customers, following a decision in February 2017 to refer customers to a panel of external providers rather than writing new annuity business.”
On 20 September, the company announced that it had signed a deal with Legal & General Retail Retirement to allow Pru customers to access its guaranteed annuity products.
Non-advised sales
Between July 2008 and September 2017, Prudential’s non-advised annuity business focused on selling annuities directly to the company’s existing pension holders.
The watchdog said that Prudential failed on a number of fronts, including;
- Ensuring that customers were consistently informed that they may get a better deal elsewhere,
- Taking reasonable care to organise and control its affairs in breach of its obligation to ensure fair treatment of customers,
- Ensuring that documentation used by call handlers was appropriate, and
- Properly monitoring calls with customers.
Skewed incentives
Like the Standard Life case, call handler incentives meant that there was significant risk that employees would put their own financial interests above the customers.
Hitting targets meant workers could earn an additional 37% on top of their base salary and win prizes such as spa breaks or weekend holidays.
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.”
