Pru inquiry made formal


Financial Correspondent

Britain's biggest insurer, Prudential, was delivered a potentially damaging blow yesterday after one of the City's top regulator's upgraded its probe into the company's mis-selling of pensions. Lautro, the unit trust and life assurance regulator, has put its unofficial inquiry into the Pru on "a formal footing". Its informal inquiry began almost a year ago.

The investigation comes just a week after the Pru admitted it would have to make provisions against possible claims for compensation from customers given bad pensions advice.

Two months ago, the Pru's outspoken chief executive, Mick Newmarch, abruptly resigned from the company. He had been adamant throughout last year that the Pru had not given poor advice to customers transferring out of company pensions schemes into private ones.

In a leaked letter last summer, Mr Newmarch had urged Lautro to keep the inquiry into the Pru's selling of pensions "informal" rather than "official". It was believed that one reason for Mr Newmarch's combative attitude last year was that an official inquiry had to be notified to the Stock Exchange but an informal one could be kept secret.

Yesterday, the Pru's spokesman said: "I don't know whether there's an enormous difference between a formal and an informal inquiry, but we said we would tell the market and that's what we've done. The positive indication that we would take from it is that the inquiry might be completed in the near future. We're very keen that it's completed as soon as possible."

Prudential received Lautro's unpublished draft findings at the end of last year and sent its response to Lautro on 1 February. The company said it was in regular contact with Lautro, now being merged as part of the Personal Investment Authority, headed by Colette Bowe.

Prudential said for the first time last week that it had made provisions for pensions mis-selling, which is expected to land the industry with a £2bn compensation bill. It did not say how much it had set aside, but expected its share of the bill to be less than its market share of about 10 per cent.

The move is seen as part of a clean-sweep approach by Peter Davis, who was apppointed successor to Mr Newmarch last week.

The spokesman said: "The provision is not material to either our policyholders or our shareholders."

It is generally acknowledged that "material" is taken to mean over 5 per cent of net assets. On this measure, the Pru's provisions could be anywhere from £10m to £50m.

The company increased its general provisions last March, said the spokesman, adding that there was no need for any specific provisions. This year it had made specific provisions, he said, but these "did not relate to the Lautro inquiry". In yesterday's statement, Prudential reiterated its belief that it had complied with Lautro rules on pension transfers.

"We believe that our approach complied with Lautro's rules. Where there is any doubt about the advisability of transferring, we said so. In practice, we advised up to 50 per cent of customers who were interested in transferring deferred pension benefits not to transfer. For the remaining customers, Prudential did not make positive transfer recommendations but did provide the information needed for the customer to come to his or her decision."

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin