STANDARD Life is facing a compensation bill of up to £125 million after being ordered by the Financial Conduct Authority to carry out an investigation into how it sold annuities to retiring customers.
The insurance giant said yesterday that it was looking in detail at whether it made customers in ill health aware that their reduced life expectancy meant they were potentially entitled to enhanced retirement income.
While Standard Life did not reveal how much it could be liable for, an analyst note from investment banking group Jefferies said the figure was likely to be in the region of £125m.
Prudential, which like Standard Life sold a large number of annuities to customers who did not receive financial advice, has not announced whether it is also carrying out an internal review, although Jefferies estimates that it could face a compensation bill of £200m.
The figures take into account Financial Conduct Authority estimates that customers who should have been sold an enhanced annuity would be entitled to between £120 and £240 of additional income each year. They also include estimates of the cost of buying additional cover now.
Jefferies equity analyst Anasuya Iyer said: “Standard Life sold around 150,000 annuity policies over the July 2008 to April 2015 period worth £2.4 billion of annuities, nearly all of which are non-advised sales.
“Over the period [Prudential] sold around £8.6bn worth of UK annuities, where around 55 to 60 per cent were non-advised, non-guaranteed on our estimate, equating roughly to 160,000 customers.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here