London & Manchester hit by record pounds 525,000 mis-selling fine

Financial regulators yesterday handed down a record fine of pounds 525,000 to London & Manchester Assurance after a year-long wrangle over its failure to compensate victims of pension mis-selling in time.

The Personal Investment Authority (PIA) ran up costs of pounds 125,000 which will also be billed to L&M, giving a total of pounds 650,000. The PIA said a visit in January last year revealed the company had lost track of 5,760 customers who were in urgent need of compensation.

The company had also failed to pursue 1,500 cases which may have been in urgent need of compensation amounting to thousands of pounds because they had been mis-sold personal pensions.

London & Manchester, a home service company which had 110,000 personal pensions, had devoted just 20 staff to the review before January 1997. The company now has 110 staff carrying out the review.

The size of the fine is thought to be due in part to repeated legal objections by London & Manchester after the PIA began proceedings last January.

Ben Gunn, managing director of L&M's life insurance wing, yesterday admitted the company's provision for pension mis-selling, currently pounds 30m, would have to rise. He said the company was "extremely disappointed" with the fine. It had planned to process the 5,760 cases "later in the process" - despite the fact it was aware of a deadline for urgent cases of 31 December 1996.

L&M has now cleared up 96 per cent of its urgent cases but still has tens of thousands of less urgent ones.