AbrdnOct 18 2016

FCA orders Standard Life to carry out annuity sale review

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FCA orders Standard Life to carry out annuity sale review

Standard Life has outed itself as one of the providers having to conduct a review of its non-advised annuity sales.

It comes after the Financial Conduct Authority found failings of “significant concern” at a small number of providers, prompting it to tell them to carry out a review.

Last week the regulator published a thematic review into non-advised annuity sales between May 2008 and April 2015.

In a statement Standard Life said: “At the request of the FCA, Standard Life will conduct a review of all non-advised annuity sales from July 2008 to identify whether our customers received sufficient information about enhanced annuities to make the right decisions about their purchase.

“It is not yet possible to determine a reliable estimate of the quantum of any redress associated with this process.

“It is possible that the financial impact may be mitigated by our group professional indemnity insurance.”

The FCA looked at 1,200 files during its review and estimated that 90,000 people could be owed redress.

While the regulator found no evidence of industry-wide or systemic failings, it did find consumers with some firms could be losing out because of the poor handling of telephone conversations.

The FCA found firms often failed to repeat key messages about enhanced annuities in one or more individual communications, either written or oral, throughout the sales process but in most cases firms provided enough information overall to allow the customer to make an informed choice.

But it said: “Nonetheless, this still suggests that all firms within our sample can improve elements of their sales processes and customer communications, especially when it comes to repeating key messages about enhanced annuities.”

Call handlers were sometimes heavily reliant on scripts, which meant they were often unable to respond to the clients’ needs or clarify areas of misunderstanding.

Where firms did not sell enhanced annuities, they did not always inform customers of this or may not even mention them at all when speaking to customers.

According to the FCA’s findings, between 39 per cent and 48 per cent of customers who bought a standard annuity from their current pension provider may have had qualifying health or lifestyle conditions which would have made them eligible for an enhanced annuity.

But it estimates that in fewer than half the sales where it found failings which changed customers’ behaviour to a less suitable course of action was there evidence they may have suffered actual financial loss.