The Prudential Assurance Company has been fined £23,875,000 by the Financial Conduct Authority (FCA) for its failure to properly explain to clients that they could get a better rate for annuities if they shopped around on the open market.
An annuity is a retirement income product that can be bought with a customer’s pension pot, and which pays them a regular income in return. According to the FCA, consumers require accurate information when choosing an annuity because it is a complex financial product. As such, firms are required to adequately explain to their customers that they may get a better deal on the open market.
However, the FCA said that, between July 2008 and September 2017, Prudential failed to consistently inform customers about the open market and take “reasonable care to organise and control its affairs in breach of its obligation to ensure fair treatment of customers.”
What’s more, the FCA found that call handlers communicating to customers by telephone were incentivised to discourage customers from shopping around with the possibility of earning an additional 37% on top of their base salary and winning prizes such as spa breaks.
“Prudential failed to treat some of its customers, who could have secured a better deal on the open market, fairly,” said Mark Steward, executive director of enforcement and market oversight at the FCA. “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.”
Prudential did not dispute the FCA’s findings and has 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. According to the FCA, Prudential has already offered approximately £110 million in redress to 17,240 customers as of September 19.