In 2009 Scottish Equitable informed the FSA that it had identified around 300 issues relating to problems in administering its policies.
These problems included not issuing around 238,000 policyholder documents; incorrectly calculating guaranteed minimum pension payments and future benefits of 774 customers; failing to identify errors in calculating rebates to charges on pension policies for 25,000 policies; not matching Department of Work and Pensions contributions to personal pensions for around 2,500 customers; and failing to trace around 200,000 policyholders who had moved without informing Scottish Equitable of their new address.
The total consumer detriment from the 300 issues identified by Scottish Equitable is estimated to be £60 million and it is undertaking a redress programme to compensate customers who missed out on payments or benefits that they were entitled to or who were disadvantaged by its actions.
The provider has already started to compensate consumers and will have paid £30 million in redress by the end of 2010.
Margaret Cole, FSA managing director of enforcement and financial crime, said: “The redress package is significant news for the customers of Scottish Equitable and I am pleased that £30 million will already have been paid back by the end of the month.
“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 made it even more difficult to fix the problems and this led to delays in getting compensation to customers.”
Scottish Equitable qualified for a 30% discount under the FSA’s settlement discount scheme. Without the discount the fine would have been £4 million.
The FSA has taken into account that Scottish Equitable co-operated with the FSA and has committed substantial resources and time to rectifying the issues identified.