The total bill for M&G Prudential’s annuity sales review has doubled to £400 million after the Financial Conduct Authority (FCA) issued insurers with a calculation for redress payments.
Meanwhile, the total provision for Standard Life Aberdeen (SLA)’s annuity review has risen from £175 million in 2016 to £275 million in 2017.
Both insurers were included in the FCA’s 2016 thematic review of annuities which required a number of insurers to re-examine their non-advised annuity sales from July 2008.
These reviews are looking at whether customers were given enough information about enhanced annuities, which offered better rates for people suffering from health conditions.
Last March M&G Prudential said it was setting aside £175 million to cover the cost of this process, but in its results last week revealed the figure had increased to £400 million.
A spokesman for the insurer said it has now received a redress calculator from the FCA and has recently begun the process of contacting clients about the review.
As well as announcing the annuity provision, last week M&G Prudential also announced the sale of its £12 billion annuity book to Rothesay Life which would see 40,000 policyholders switch provider.
When asked if the annuity review liabilities would be passed to Rothesay Life, the M&G Prudential spokesman said he was 'unable to disclose the contractual terms of the arrangement with Rothesay Life.'
Meanwhile, SLA announced in its annual results last month that it had increased its annuity sales review provision to £275 million. This included the £27 million used so far to address the issue.
Last month SLA also sold its annuity book to closed-book provider Phoenix and a spokeswoman for Phoenix said it will take over this liability at 'completion [of the deal] and is priced into the sum paid for the acquisition.'
She added Phoenix has an indemnity agreement in place with SLA.
Another insurer included in the FCA’s annuity sales review is Abbey Life which was bought by Phoenix in 2016.
In Phoenix’s results last week the provider said that 'Abbey Life has completed the thematic review of annuities and has agreed with the FCA to undertake a past business review. We are working closely with the FCA on the scope of this review.'
Abbey Life was also included in the FCA’s longstanding customer treatment thematic review which is still ongoing. The regulator is 'exploring whether remedial and/or disciplinary action is necessary or appropriate in respect of exit or paid-up charges being applied,' the Phoenix results said.
Phoenix has set aside £54 million for Abbey Life’s inclusion in the two thematic reviews.