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
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
News
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before