Regulator demands RBS unit reviews over-70 annuity sales

The Isle of Man Bank, a subsidiary of the Royal Bank of Scotland, has been told to review all of its annuity sales to over-70s after the Isle of Man financial regulator said that it failed to perform adequate checks into a dying man’s health before selling him an annuity.

The Isle of Man Financial Supervision Commission said that Mr Norman Hensher was dying of cancer when he was sold an Aviva annuity for approximately £500,000 and that he died before receiving his first payment.

The commission found no evidence that the bank had made further enquiries regarding Mr Hensher’s health despite knowing he had cancer, or how this would relate to his purchase of an annuity “which would have little or no chance of returning the principle sum invested and no value for his estate or surrender provision”.

By failing to investigate more completely, the bank did not fully follow internal procedures before selling Mr Hensher his annuity, the regulator added.

RBS confirmed that the full price of the annuity has been returned to his estate and the £15,000 commission paid to the bank will be returned.

The regulator has told Isle of Man Bank to launch an independent review into all sales to persons aged 70 years and older made from 1 January 2008.

A spokesperson for RBS said: “We believe Mr Hensher’s case was a unique set of circumstances. At all times the bank acted in accordance with Mr Hensher’s wishes and at no time has the FSC suggested we mis-sold the product to Mr Hensher.

“The financial adviser left the bank last year, unconnected to this matter. The commission was paid to the bank and as the sale has been unwound, will be returned.”

Aviva said in a statement: “Further to on-going consultation with the Isle of Man Bank, we have been informed that a thorough review of Mr Hensher’s files has now taken place by the bank, in conjunction with the Isle of Man Financial Supervision Commission.

“The decision has been made by the Isle of Man Bank to reverse the sale of the immediate life annuity to the late Mr Hensher. As such, all funds held will now be passed to Mr Hensher’s estate.”