United Assurance raises mis-selling provision to pounds 150m

United Assurance, the life assurance group formed last year from the merger of Refuge Assurance and United Friendly, yesterday more than doubled the amount it is setting aside to pay compensation to investors who were mis-sold personal pensions to pounds 150m. Andrew Verity reports on the embarrassing admission.

United Assurance warned that it may not be able to meet strict deadlines set by the Treasury for compensation victims of the pension mis-selling scandal. Directors blamed delays on difficulties obtaining information from both occupational schemes and its own clients.

Group chief executive George Mack denied that the company had failed properly to estimate its own liability in the past.

He said the extra money was needed to meet liabilities in full in the wake of a tougher attitude on mis-selling from the Treasury. Budget changes to tax credits have also increased the cost of compensation.

Mr Mack also claimed that the cost of redress had risen because United is to offer mis-selling victims guarantees of redress in future - a more expensive method than compensation upfront.

However, the doubt cast on United's ability to meet the Treasury deadlines could damage future earnings. Government ministers have hinted that companies which do not meet the deadlines could be excluded from selling stakeholder pensions.

Stakeholder pensions, expected to be introduced in the next two years, will target low income savers - a key market for United, a home service company whose sales people collect premiums door to door.

Home service companies are particularly exposed to the mis-selling scandal. Prudential, which was once the largest player in this market before it quit the business, revealed a pounds 450m provision for mis-selling two months ago. It had previously set aside just pounds 250m.

In contrast to a Prudential decision to make policyholders pay 90 per cent of the compensation costs with shareholders paying only 10 per cent, United's shareholders will bear 80 per cent of the costs.

The announcement came as United struggled to appease shareholders, who have been frustrated by delays in getting DTI approval to restructure the group. It announced it had finally got approval for shareholders to reap most of the pounds 37m cost savings flowing from last October's merger.

The directors have also bowed to pressure from the market to ditch a loss-making direct-selling vehicle, United Friendly Financial Planning. This was sold to Friends Provident for a loss of pounds 2m. One analyst said this was a misguided venture upmarket which should have been ditched long ago. "It has taken them a very long time to do what is obvious," he said.

Mr Mack said the company had struggled to find qualified staff. "It is easy to look with twenty-twenty hindsight, which is all right in itself. But coming up against practical difficulties is quite different."

Mr Mack admits morale is low among United's staff as more than a third must leave or be made redundant. Of 6,400 staff, 900 have left after turning down the option of relocating from London to Wilmslow, the company's new headquarters in Cheshire.

But the company is currently selecting more staff for compulsory redundancy to bring numbers down to 4,200. Of 279 branches, 160 are to be shut.

United's operating profits nearly doubled to pounds 158m in the six months to June, excluding the provision for mis-selling. However, pounds 67.8m of this came from the investment return on more than pounds 800m of surplus assets. In the same period last year, United was blocked from attributing these surplus assets to shareholders.

The figure for operating profits also masks a 5 per cent drop in new premiums from January to June against the same six months last year. This contrasts sharply with close competitors such as Britannic Assurance, which has boosted sales after competitors such as Prudential withdrew from the market.

Investment column, page 27

Arts and Entertainment
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
Is this how Mario Balotelli will cruise into Liverpool?
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
ebooksAn evocation of the conflict through the eyes of those who lived through it
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

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year