The FCA has fined Standard Life Assurance Limited ("SLAL") £30.7 million, after a 30% settlement discount, for mis-selling annuities to customers from 1 July 2008 to 31 May 2016. The FCA found that SLAL had breached Principles 3 (Management and Control) and 6 (Customers' Interests) in relation to the non-advised sale of annuities to existing customers who were approaching retirement and who may have been eligible for an enhanced annuity.
The FCA found that SLAL's approach to selling non-advised annuities to existing customers included incentives offered to its call handlers which put pressure on them to sell, and encouraged them to place their own financial interests ahead of their customers. Incentives included substantial bonuses for call handlers who met or exceeded monthly annuity sales targets.
One of the key issues identified was SLAL's use of high level call guidelines which meant that call handlers were not equipped to provide relevant and important information in relation to enhanced annuities (including customers' entitlement to shop around) in a consistent and non-misleading way. Further, the significant discretion with which call handlers were able to communicate with customers created a risk that they would not obtain adequate information to appropriately determine a customers' eligibility for an enhanced annuity.
Amongst other things, the FCA found that SLAL did not have suitable systems and controls in place to monitor the quality of the calls between its call handlers and non-advised, potentially vulnerable, customers and that it failed to mitigate the risks created as a result of its employee incentive schemes.
SLAL was, however, given credit for various matters. It voluntarily agreed to undertake a past business review in 2017 which sought to compensate customers who were likely to have suffered loss as a result of the firm's failings. As at 31 May 2019, SLAL had paid approximately £25.4 million to over 15,000 customers. The redress scheme continues, with a further £35 million due to be paid out. Further, it closed its enhanced annuity product to new business in 2016. In addition, SLAL was found to have been working very co-operatively with the FCA in respect of its past business review.
Given the poor customer outcomes and consumer detriment, or significant risk of them, the failure to treat customers fairly, and the weaknesses in the relevant management systems and controls, it is perhaps not surprising that the FCA considered the failings to be serious.
The seriousness was such that the FCA found the failings (in the period in which such regime applied) to be level 4, where level 5 is the most serious. The mitigating factors referred to above led to a discount of 10% on what the penalty would otherwise have been.