Standard Life fined £2.45m for misleading customers
Standard Life mislead customers telling them a pension fund was fully invested in cash
Wednesday, 20, Jan 2010 11:58
By myfinances.co.uk staff
Insurance giant Standard Life was fined £2.45 million today for misleading thousands of pensions customers about the safety of one of its funds.
The Financial Services Authority (FSA) said the firm was guilty of "serious systems and controls failings" that resulted in investors receiving marketing material suggesting its Pension Sterling Fund was a low-risk cash fund appropriate for people who were approaching retirement.
But in January it was revealed that only 12% of the fund was held in cash and a substantial amount was invested in toxic mortgage assets meaning the collapse in the property market and rising bad debts had reduced the fund's value by 4.8 per cent.
About 98,000 investors who thought they were in a low-risk fund faced losing money, until Standard Life paid in £102.7m to restore losses. It has since contacted customers to check if they need to be further compensated.
The FSA said that between July 2006 and February 2009 Standard Life failed to ensure there were proper systems and controls governing the fund, particularly in relation to the marketing material produced.
It added that marketing material regarding the fund was "not clear, fair and was misleading", and had claimed it was wholly invested in cash.
Margaret Cole, the FSA's director of enforcement and financial crime, said: "The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence.
"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."
Coleman said the FSA would continue to take strong action against companies who published misleading literature. It added that Standard Life had co-operated fully with its investigation and agreed to settle quickly, avoiding a larger fine of £3.5m as a result.
In a statement Standard Life said it had "learned important lessons from this mistake".
It added: "When our own internal review identified problems with some of our literature in February last year, we immediately apologised to customers and injected over £100m into the fund to compensate them for their losses from the sudden fall in unit price.
"Since then, we have conducted a full and thorough review of existing literature and put in place a new improved process for new literature.
"We have worked closely with the FSA throughout and co-operated fully with their investigation."