The Financial Conduct Authority (FCA), the UK financial regulator, has fined Standard Life Assurance Limited (SLAL) with a £30.79m fine for failing to comply with the rules regarding non-advised annuity sales.
The fine comes after the FCA found that SLAL had failed to live up to its principles regarding management and control as well as the on regarding customers’ interest. The infringement is supposed to have happened in the eight-year period between July 1 2008 and May 31 2016.
In short, the FCA took issue with how SLAL was selling annuities, a form of retirement incomes which can be bought partly or fully with a customer’s pension pot. The idea is that buying annuities will provide a regular income to the customer. Given annuities are complex financial products, the FCA’s standards stipulate that people buying annuities need accurate information to ensure an informed purchase.
For instance, sellers should inform customers that they may get better rates if they shop around with different vendors. They should also tell them about how their things that may affect their life expectancy – like health issues and lifestyle – could entitle them to an enhanced annuity.
However, the FCA has accused SLAL of failing to put in place structures to monitor calls between the company’s sellers and non-advised customers. At the same time, SLAL allegedly offered its sales team bonuses to sell annuities, which the FCA stated could arguably put their own financial gain above the interest of their clients. As a result, the FCA believed SLAL’s call handlers were less inclined to provide the knowledge needed choose annuities best suited for their own individual circumstances.
SLAL’s call handlers had the opportunity to receive significant bonuses and rewards if they met or exceeded sales targets. During the period of misconduct, almost 22 per cent of call handlers received more than 100 per cent of their basic salary in bonus payments.
And with SLAL’s high level call guidelines call handlers were given significant discretion about how they communicated with customer.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Standard Life Assurance Limited’s controls needed to place fairness to customers at their heart. Here, the financial incentives available to staff for selling non-advised annuities by telephone created conflicts which led to unfair outcomes for some customers. Firms must have controls in place to ensure they are prioritising fairness to customers.”
SLAL has not disputed the FCA’s findings, which meant it qualified for a 30 per cent discount that in turn reduced the £43.99m fine it would’ve otherwise received.
As part of past business review, SLAL has identified and paid redress to those customers who were likely to have suffered or did suffer because of the company’s failure to comply with the FCA’s standards. At the end of May 2019, the businesses had paid roughly £25.3m to 15,302 customers.
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