Standard Life fined £2.45 million for dodgy pension leaflet
The Financial Services Authority has fined Standard Life £2.45 million for using marketing material that mislead investors in one of their pension plans.
Marketing literature had referred to the Sterling Pension Fund as being invested in cash, when in fact most of the fund was invested in floating rate notes in July 2007. The risk profile of these two investments is clearly different, and the FSA held that the members may not have put money into the funds had they been given correct information.
Members of the Standard Life marketing team had expressed concerns about the accuracy of the material, but the FSA investigation found that their opinions were ignored. Standard Life’s actions went against the FSA’s principle that investors should be educated about the choices they make.
There were 98,000 customers of the fund on 23rd December 2008.
Commenting on the decision, Margaret Cole, FSA director of enforcement and financial crime concluded:
“It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved. Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy. Throughout 2010 and beyond, the FSA will continue to take strong action when a firm’s financial promotions fall short of the requirement to be ‘clear, fair and not misleading’ and customers have not been treated fairly.”
The fund had suffered unexpected losses of 4.8% (around £100m) as of 14 January 2009. In an attempt to restore investors to the position they would have been in had the marketing material been correct, Standard Life injected £102.7million into the fund and carried out an investigation into whether members of the scheme required further compensation.
The FSA took this payment, and Standard Life’s full cooperation with their own investigation into account when deciding on the figure that they would impose as a fine - the FSA had originally intended to impose a £3.5million penalty. The discount came as a surprise to many, given that the staff at Standard Life who initially raised objections to the marketing material in 2007were ignored.
A spokesman from Standard Life has confirmed that no one will lose their job as a result of this decision, claiming that “the FSA has identified that there were flaws in both our systems and controls however they have not identified any particular individuals. No heads are going to roll on the back of this fine from the FSA.”
But financial institutions all over the City must be reading and rereading their marketing material following the announcement of this fine.
