Wednesday, April 13, 2011

Prudential Payout

The Telegraph reports that the Prudential is writing to 39,000 customers to tell them it issued incorrect valuations of their pension funds up to seven years ago, and offering them a total of £4M in "correction payments".

The Prudential said most of the affected policyholders would receive payments of less than £100, but 9,000 will get up to £500 while 100 others will be paid £2,000 or more.

Apparently, the mis-pricing errors affected Scottish Amicable unit-linked pension plans between June 2004, and December 2008.

Prudential, according to the Telegraph, assumed that ScotAm did the same but discovered as part of a routine audit that this was not the case.

There are a few questions popping into my head about this eg:

1 Why has a "routine" audit only now discovered an error dating back to 2004-2008?

2 Why is a "routine" audit being carried out on transactions that are several years old?

3 Why did Prudential "assume" that ScotAm followed the same procedures?

4 Did Prudential not perform a due diligence on ScotAm when the business was transferred several years ago?

I suspect that more will come out on this issue, and that the story will not quietly fade away.

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