Lloyds fined over pensions mis-selling

Imro, the investment regulator, yesterday dished out its heaviest penalty for mis-selling pensions and the first against a high street bank by fining Lloyds TSB pounds 325,000 and ordering it to pay pounds 63,000 in costs.

The investigation by Imro into the bank covered 14,000 pensions transfers made by Lloyds between April 1988 and June 1993. Of those, 2,600 have been identified as priority cases which need immediate attention.

Lloyds anticipates that 1,500 of the priority cases will require compensation and has already offered an average payment of pounds 4,000 to 164 of them.

This is the fifth disciplinary action announced by Imro for pensions that were mis-sold before 1994. It has three investigations outstanding as a result of a review ordered by the Securities and Investments Board, the main City regulator, after it discovered that 1.5 million people may have been mis-sold personal pensions.

The fine announced yesterday related to three charges brought against Lloyds Bank by Imro.

Imro said the first charge related to Lloyds' failure to obtain relevant facts about a customer's personal and financial circumstances that were needed in order to give advice on carrying out a pension transfer.

In particular Lloyds did not obtain all the benefits provided by the schemes that people had transferred from. This meant it was unable to provide illustrations of a personal pension which could be properly compared with the occupational scheme that employees were leaving.

Secondly, Lloyds failed to have a system to ensure all customers had information required to make a fair and balanced decision on carrying out a pension transfer. Imro said Lloyds did not have procedures to obtain all relevant facts about a customer's personal and financial circumstances from April 1988 until February 1993.

The third charge was that between May 1990 and June 1993 Lloyds failed to ensure that all customers had the information required to make a fair and balanced decision on carrying out a pension transfer.

Lloyds did not always provide illustrations of a personal pension which could be compared on a like-for-like basis with the employer's pension scheme. And Lloyds did not always advise customers that a personal pension might not result in as high a pension as could be expected by remaining in their employer's pension scheme.

A spokeswoman for Lloyds said: "A complete overhaul of business procedures took place more than three years ago to ensure that other customers would not, and could not, be similarly affected in the future."

Lloyds stopped conducting its pension transfer business when the problems were unearthed. "Procedures are in place to ensure that those affected will be fully compensated for any losses which may have arisen in their pension schemes," the spokeswoman said.

The bank made provisions of pounds 165m in 1995 for possible compensation payments. This is not just for Lloyds Bank but also for TSB, which it merged with in 1995, and Lloyds Abbey Life, its insurance subsidiary .

Imro is leading the way in the review ordered by the SIB, having investigated around 77,000 pension transfers made by 46 firms. Imro instigated formal investigations into 23 of these firms, five of which, including Lloyds, led to disciplinary action. Three cases remain outstanding.

The four other firms to settle with Imro were Godwins, Willis Corroon Financial Planning, Heath Consulting and Alexander Consulting Group. Another firm, Kerr, has been disciplined for pensions mis-selling since 1994.

Five of the investigations led to no action being taken while nine firms have received penalties.

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