Scottish Equitable pays out £60m to pensions customers
Thousands of customers of Scottish Equitable will receive a share of £60m following an investigation into procedures at the pensions provider.
The company was also fined £2.8m by the Financial Services Authority (FSA) for the problems it caused for customers.
These included incorrect pensions calculations, not issuing thousands of policyholder documents, and failing to trace policyholders who had moved home.
Some £30m of the compensation will be paid by the end of the year.
Scottish Equitable is now known as Aegon. It was bought in 1994 and rebranded as Aegon in 2009, but Scottish Equitable plc remains the legal name for the life and pensions company.
The company said it "sincerely regrets" that customers suffered financial losses and inconvenience.
Aegon offers pensions, life insurance, asset management and financial advice to about two million customers in the UK. It employs 4,000 people, including 2,400 in Edinburgh.
In 2009, it told the regulator that it had found about 300 issues relating to problems in administering policies.
- Not sending out 238,000 policyholder documents to customers
- Failure to trace 200,000 policyholders who had moved without telling the company of their new address
- Incorrectly calculating minimum pension payments, costing 774 customers a total of £6m to £7m
- Not resolving Charge Rebates and Fund Value Rebates for 25,000 policies, costing customers about £5.7m and £2.8m respectively
- Failure to match Department of Work and Pensions contributions to personal pensions for 2,500 customers, costing £6.7m.
Scottish Equitable is compensating customers who missed out on payments or benefits they were entitled to, or who were disadvantaged by the poor administration.
The fine was one of the biggest levied this year by the FSA, and comes on top of the compensation package.
"The redress package is significant news for the customers of Scottish Equitable Plc and I am pleased that £30m will already have been paid back by the end of the month," said Margaret Cole, of the FSA.
"This case shows the importance of getting customer administrative procedures right and fixing them quickly when they go wrong. This is a key part of treating customers fairly.
"By letting the issues build up over such a long period Scottish Equitable Plc made it even more difficult to fix the problems and this led to delays in getting compensation to customers."
A spokesman for Aegon said: "The immediate priority of the programme has been to deal with issues that resulted in financial detriment and to return affected customers, wherever possible, to the financial position they would have been in had the issue not occurred and, if not, to pay them appropriate compensation.
"Aegon is on target to resolve all five of the issues specifically examined by the FSA by the end of April 2011 and expects the bulk of the remainder of the programme to be completed by the end of 2011.
"Aegon sincerely regrets that some customers have suffered financial detriment or inconvenience. Its redress programme aims to resolve all the issues as quickly as possible and is a top priority for the firm."
The case also highlighted some issues for the future, according to a law firm, when regulation is changed and the work currently done by the Financial Services Authority is divided between new agencies.
"This is a particularly sharp example of FSA administering credible deterrence. But the really interesting element here is how cases like this will be handled once the single regulator has been dismantled," said Paul Edmondson, of law firm CMS Cameron McKenna.
"Activities of traders will be of concern to the Consumer Protection and Markets Authority as the regulator of markets but also, as in this case, to the Prudential Regulation Authority because of prudential abuses. This is a timely example of the potential confusion of responsibilities and of the need for the two new bodies to work closely together."