SIB accuses Prudential of giving clients wrong advice

Prudential, the UK's largest insurer, has come under fire in a report by the City's main regulator, the Securities and Investments Board, over claims of mis-selling of financial products and an alleged refusal to compensate victims.

The company is accused in the SIB report of wrongly advising clients to place money in one of its popular products, the Prudential Savings Account, to the exclusion of more suitable investments, it emerged yesterday.

The report follows a two-month investigation by the regulator's monitoring team. A draft was submitted to the company at the end of March.

In a bizarre twist, the SIB has also complained that members of its monitoring team were shadowed by Prudential compliance staff who used pre-arranged hand signs to prevent those being interviewed from giving out too much information.

Each night, the Prudential team was instructed to prepare detailed reports on the interviews carried out and any records examined by the SIB monitoring staff that day.

Jim Sutcliffe, chief executive of Prudential's UK retail operation, admitted yesterday that with hindsight, the actions of some its shadowing team may have been "over-eager" and that their actions were interpreted as "adversorial". But he disputed the accuracy of some of the SIB findings.

The SIB's final report is expected in the next few weeks following last- minute representations on points of fact by Prudential.

The City regulator will then decide whether to issue a public reprimand against Prudential, the heaviest penalty it can impose. The SIB last night refused to comment.

The SIB's findings will be a serious embarrassment to Prudential, which has long prided itself as being a cut above other financial services institutions.

The company has long been hostile to the Personal Investment Authority, the current front-line financial watchdog, arguing that it is an inadequate regulator and statutory controls are needed instead.

The Prudential is alone among insurers in being regulated directly by the SIB. However, Scottish Amicable, the insurer the Prudential aims to take over before the end of the year, will remain under the PIA's control.

The allegations against Prudential centre on its Savings Account, a high- selling contract linked to the company's life fund. Such policies suffer from so-called "fiscal drag", which is underlying taxation on the life fund itself.

They may therefore not be suitable to higher-rate taxpayers, who would be required to pay even more tax on their investment, or to non-taxpayers who need not be paying tax on their savings. The SIB's draft report claims that in some cases, Savings Account schemes were wrongly sold to such investors.

The report also claims that the company's salesmen were selling a second Prudential pension to many customers, incurring new set-up charges, rather than simply arrange a top-up to the existing one.

In both instances, the SIB alleges that the Prudential has been unwilling to compensate victims unless they come forward and ask for redress.

The company is also said to be unprepared to bring together separate records from two computer systems that would allow it to identify and compensate those persuaded to buy two separate pensions.

The Prudential did identify questionable selling practices among members of its salesforce in the Sheffield area two years ago. However, the report says surveys to discover the extent of potential mis-selling were restricted to the local area itself, rather than extending the inquiry nationwide as the SIB believes is needed.

Finally, the report adds, the company's training methods do not allow it to say with certainty whether the salesforce is capable of putting its newly-learned financial skills into practice.

Mr Sutcliffe said yesterday errors may have been been made but in many cases the advice given on Savings Accounts was not necessarily wrong.

The investigation into the Sheffield episode had covered 19 branches, he said: "However, we are aware SIB thinks we should have investigated more branches. They are not confident of the standards of our investigation. We will redress that and look at a new sample of cases."

Mr Sutcliffe rejected as "factually incorrect" suggestions that pensions compensation was not being paid. He said that for three years now the automatic policy had been to refund all charges on a second pension sold to Pru customers.

He acknowledged, the "hand signals" issue had been mentioned to him. This was carried out by one or two members of a separate "business quality unit" attached to the compliance team.

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

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Mortgage Administrator

£20000 - £25000 per annum: Recruitment Genius: We are a vibrant and establishe...

Recruitment Genius: Payments Advisor

£15000 - £20000 per annum: Recruitment Genius: An experienced Repayments Advis...

Recruitment Genius: Investment Analyst

£25000 - £30000 per annum: Recruitment Genius: This leading provider of financ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you looking to take your ...

Day In a Page

Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests