Friends said it had given a “letter of support” to the Sesame group to assist in meeting potential liabilities from a past business review into pension transfers, but did not expect any costs arising from them to hurt the wider group financially.
In June 2013, the Financial Conduct Authority (FCA) fined Sesame Bankhall Group £6m for failing to ensure advice given to customers, particularly on Keydata life settlement products, was suitable.
“A number of business reviews are currently being undertaken in these companies and provisions of £31m have been included in respect of customer redress,” Friends said in a statement. “There is considerable uncertainty surrounding the outcome of these reviews, the number of future complaints and the associated costs for dealing with redress and complaint administration activities.”
Sesame Bankhall made a loss of £19m in 2013, which was described by Friends as “disappointing”. The parent company is conducting a strategic review of Sesame’s position within the group, though rumours of a sale of the business have not materialised.
Meanwhile, parent company Friends Life, which reported operating profits of £170m for the first six months of 2014, down £11m on the same period last year, has set out its strategy to take advantage of the “significant opportunities” presented by changes to pensions announced at Budget 2014.
It said it will focus on its existing mass affluent customers, who do not have an active IFA relationship and are “unlikely” to pay fees for advice.
In the first half of 2014, it said it had contacted about 50,000 customers through direct mail, offering them support and guidance on their retirement options, and before the end of the year intends to contact a further 100,000 who are reaching a “critical point” in their retirement journey.
Product providers’ role in delivering free retirement guidance to all retirees from April next year, as announced at Budget, should be marginal, the government has said, and consist of pointing retirees in the direction of independent organisations such as the Money Advice Service and The Pensions Advisory Service.
“Alongside the proposed guidance regime, we will proactively engage with our customers to ensure they feel able to make an informed choice,” it said.
Friends said it expected the biggest area of growth in the near future to be in ‘flexible income’, and that a proposition offering both a pensions based vehicle alongside an ISA, and ensuring tax efficient switching between the two, would be “key”.
