A group of experts have questioned the ability of the Prudential Regulation Authority (PRA) to exercise oversight of pension transfers.
The regulator has come under increased criticism for approving a £12 billion transfer of annuities from insurance giant Prudential to the smaller Rothesay Life earlier in this year. The deal, covering around 400,000 policyholders, would have been the largest transaction of its type – however, a High Court ruling blocked the transaction in August after receiving complaints from customers.
Now, the Financial Times reports that a group of pensions experts and policyholders – including former PRA regulator Dean Buckner – have written to Sam Woods, chief executive of the PRA, accusing the watchdog of playing “fast and loose” with pensions.
According to the Financial Times, the letter’s authors highlighted concerns that the PRA downplayed the “weak financial position” of Rothesay relative to Prudential by neglecting to flag its heavy dependence on “artificial capital.” The authors also said that the regulator lacked transparency in not disclosing what it called a “large portfolio of risky assets” – including loans of some £1.7 billion to the property investor Vincent Tchenguiz.
Meanwhile, Rothesay Life told the Financial Times that it strongly contests the claims made in the letter, arguing that it contains “multiple significant factual inaccuracies and errors”.
“Rothesay Life is one of the best capitalised insurers among its peers and has significant backing from its shareholders, who in the last month injected £700 million of new capital in order to fund further growth of the business,” the firm said. “Policyholders can gain comfort from the high level of security offered by the PRA’s regulatory capital regime as well as its support from strong and committed shareholders.”