Prudential has been fined £23.8m for failures related to non-advised sales of annuities, the Financial Conduct Authority (FCA) said today.
The company has also offered customers approximately £110m in compensation for its breaches.
The City watchdog said Prudential’s non-advised annuity business focused on selling annuities directly to existing Prudential pensions holders.
Firms are required to explain to customers they may get a better rate if they shop around.
The FCA said Prudential failed to do this consistently.
It also failed to ensure documentation used by call handlers was appropriate and failed to monitor calls with customers properly, the FCA said.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: ”Prudential failed to treat some of its customers, who could have secured a better deal on the open market, fairly. These are very serious breaches that caused harm to those customers. Prudential is now rightly focussed on redress and today’s financial penalty reinforces the cardinal obligation of fairness that firms owe to customers.”
Catherine McKinnell MP, interim chair of the Treasury Committee, said: “Prudential failed to inform its existing pension holders that they may be eligible for a better annuity rate if they shopped around. The company must now ensure that its customers receive the redress to which they are entitled as quickly as possible.
“This is yet another example of incentives in the financial services sector leading to a poor outcome for consumers. This toxic culture must be wiped out.
“Competition benefits consumers; Prudential’s actions have undermined this.”
An annuity is a retirement income product that can be bought with a customer’s pension, and which pays them a regular income in return.
Before 2013, sales-linked incentives for call handlers and their managers increased the risk of call handlers putting their own financial interest ahead of ensuring a fair outcome for their customers.
Call handlers could earn an additional 37 per cent on top of their base salary and win prizes such as spa breaks or weekend holidays.
Prudential conducted a review of non-advised annuity sales and as a result offered redress of approximately £110m to 17,240 customers.
The company did not dispute the FCA’s findings which meant it was given a 30 per cent discount on its fine.
Without the discount the FCA would have imposed a £34.1m fine.