In case you missed it, Standard Life was fined £30m for allowing its staff to abuse the trust of its customers and sell them annuities that paid them a lower pension than they could get elsewhere.
The fine would have been £40m but through a plea-bargain, Standard Life got 25% off.
You might think that Standard Life could treat their captive customers how they liked and that “caveat emptor” applied but you would be wrong.
The FCA operates under the principle that insurers treat their customers fairly and by denying their customers the benefit of open market and enhanced annuities, Standard Life failed.
This was not a “cock-up”. This went on between 1 July 2008 and 31 May 2016, it was a systemic feature of the Standard Life business model.
Those who campaigned to get these sharp practices banned have long memories and undiminished passion.
Blood now boiling.
“Mad March” bonuses to flog annuities. Sickening. pic.twitter.com/y81mH9JRdm
— James Coney (@jimconey) July 23, 2019
But who will be accountable for this crass behaviour?
No one will be blamed
Since 2016 Standard life has passed through an intermediary stage as Standard Life Aberdeen before becoming a part of the Phoenix Group. The head of its workplace pension division became a non-executive Director of Phoenix before being appointed last month as CEO of Royal London
The head honcho – Alan Nish is now on the audit committee of HSBC bank where he’s also a non-executive director.
Other senior executives of Standard Life hold equally important roles in the insurance sector and the degree of personal accountability for what has happened appears to be zero.
The last person standing is current Standard Life CEO, Susan McInnes . Susan is not a Standard Life person, she has worked at Phoenix Group for ten years but only took on her role with Standard late last year. She is playing a straight bat as she should.
No single person will be fingered for the way that Standard life preyed on customers with limited financial capability and a trust in the Standard Life brand. The bill will be picked up by Phoenix shareholders and the affair could be swept under the carpet as something that “wouldn’t happen today”.
I think we have to pragmatically accept this and make sure this does not happen again.
Let’s take a step back – this was an abuse or trust.
Standard Life aren’t any old insurance company. Although Standard Life Assurance only set up shop in 2005, Standard Life as a mutual traces its roots back to 1825 as it proudly boasts to those who are part of its advisory network – 1825.
As with Equitable Life, the probity of Standard Life was based on its mutual roots and its longevity. As with Equitable Life, this probity is being tarnished by its behaviour around post retirement options. The annuity problems at Equitable were different than those at Standard Life but when push comes to shove, the customer was mis-sold at both.
Standard Life abused the trust that it had created over nearly 200 years.
We cannot say this wouldn’t happen again today. We are responsible for making sure it doesn’t and that means taking a look at what happened and learning lessons.
Any difference between Equitable and Standard Life?
The main difference in accountability between Equitable and Standard Life was that the former’s management team managed the flack and took it themselves. I don’t say this exonerates Roy Ransom and his team, but at least they faced their music.
I don’t see any of the Standard Life team who were at the wheel between 2008 and 2016, being called to account for the way the company set up, managed and profited from the sale of Standard Life annuities and this worries me.
But it doesn’t worry me as much as the thought that annuities and other at retirement products are still being mis-sold today.
Very different for some
Not all at the coal-face can walk away from the problems they create.
For UK regulated financial advisers, the option to walk away from the advice they have given -for instance on pension transfers – is not available. They can rightly ask why this is not the case for executives of insurance companies.
And the annuity brokers who were cut out of the chance to offer whole of market annuity advice can only watch on.
Insurers, advisers and brokers all have a part to play in promoting good decisions at retirement. We should be working with Pensions Wise and MAPS to ensure that vulnerable people go to places where they are treated fairly.
I know the Equitable whistle-blowers – they were heroes, those who blew the whistle on Standard Life must have been brave too.
I don’t think we can expect the FCA to be able to spot every rogue advisor in the UK (and abroad). It is up to those of us who are involved in helping people taking decisions at retirement to make sure they don’t end up in the hands of Equitable or Standard Life style practices.
Could this happen again?
As I have said on this blog before, I am deeply uncomfortable about the way some occupational pension schemes offer no guidance to members approaching retirement.
There are good annuity brokers out there, Retirement Line and the Hub being two.
But Trustees and large employers who run their own occupational trusts are reluctant to point their staff to such brokers, worried about the implications to them of signposting a “wrong option”.
But as long as they aren’t signposting the open market option and offering a link or a phone number to a reputable annuity broker, they run the risk of staff falling into the hands of scammers – or perhaps other direct sales forces who may be behaving like Standard Life (dd).
So yes – absolutely – this could happen again.
How you can protect your members and staff from poor annuity purchasing
Part of the problem at Standard Life was down to a failure of employers with Standard Life Workplace Pensions to properly flag the value of the open market option and of getting a medically underwitten annuity.
If you are involved with an occupational pension scheme which has a DC section (including DC AVCs) or a workplace GPP you are welcome to come to one of four summer seminars I am running in WeWork Moorgate
We will be addressing this issue and introducing Retirement Line as a straightforward way of ensuring the problems which happened at Standard Life, don’t happen to your staff/members.
You can sign up to one of these seminars which are on 13th, 14th of August and 28th and 29th of August using this link SIGN UP HERE
Most people don’t take financial advice and many who buy annuities still do so without the expertise displayed by Retirement Lined and other reputable brokers.
We cannot pretend that the problems at Standard Life won’t reoccur. So long as we have vulnerable people with limited financial capability, we will have people ripped off at retirement.
So it is up to the people who run the reward, HR, pension and general management functions that operate workplace pensions to step up to the plate and make sure that what happened at Standard Life for 8 years – does not happen again.