Insurance giant Prudential is due to pay out £4 million to 39,000 customers after mistakes made with their pension fund were discovered. An internal audit by the Financial Services Authority revealed the mistake.
The mistakes were centered on the calculation of tax credits linked to pensions distributed between June 2004 and December 2008 by Scottish Amiable, who were taken over by Prudential in 1997.
Prudential recovers the tax deducted from investment income and adds it back into the policies, but there was an inconsistency in the way these credits were paid to some customers. As a result, Prudential are due to reimburse policyholders up to £4 million pounds.
A Prudential spokesman said: “Tax is deducted from investment income earned by unit-linked pension funds and recovered against Prudential’s tax liability. We assumed that Scottish Amiable did the same but discovered as part of a routine audit that this was not the case.”
Prudential state that most of the affected customers are estimated to receive payouts worth under £100 due to the mistake, but 9,000 policyholders are due to receive between £100 and £1000 and 100 will receive over £2,000.
The 39,000 customers being contacted had either retired, transferred or partially surrendered their holdings and thus were affected unknowingly.
Prudential claim: “We are putting them in the position that they would have been in had the tax credit been paid into their fund. The amounts we are paying to affected customers are to correct the value of their holdings which were undervalued when they were sold.”
Who can savers trust?
After this revelation, public trust in pensions providers is at an all time low; Prudential are one of the biggest and most revered companies and for them to admit a mistake has affected confidence in them and the system.
The Daily Telegraph reader who discovered the discrepancy stated: “There must have been a fundamental problem for this mess to go on undetected for so long with a concession only in 2011.”
Prudential faces a difficult task ahead of them now as they try to contact the 39,000 policyholders affected. With simple things such as a change of address or a change of surname making people even more difficult to track down, this seems like an arduous task.
If you had a Scottish Amicable unit-linked pension between June 2004, and December 2008, call 0845 640 3000 and select 2 for pensions.