* FCA finds no evidence of industry-wide failure
* Removes fears of big bill for misselling policies
* Some firms may have to offer redress
(Recasts first paragraph, adds comment from former pensions
By Huw Jones and Carolyn Cohn
LONDON, Oct 14 Britain's financial watchdog left
the threat of penalties hanging over a "small number" of
insurance firms on Friday for failures in the information on
pensions provided to customers in poor health.
The overall finding that there had been no industry-wide
wrongdoing came as a relief to a sector in the throes of
sweeping changes and questions about fees and which feared a
scandal similar to the mis-selling of payment protection
insurance that has cost banks billions of pounds.
But some firms may yet have to pay compensation to customers
who should have been sold a different type of annuity.
"Customers in poor health have been short-changed on their
pension income for the rest of their shortened lives," said
former pensions minister Ros Altmann who now speaks on industry
The sums involved were relatively small. In cases where a
customer would have been eligible for an "enhanced annuity",
lost income ranged from 120 to 240 pounds ($150-300) a year.
The Financial Conduct Authority (FCA) investigated sales of
this type of annuity -- a form of pension that pays out until
death. The enhanced annuities typically offer people in poor
health higher payouts than standard versions because they have a
shorter life expectancy.
"The FCA found ... no evidence of an industry-wide or
systemic failure to provide customers with sufficient
information," the watchdog said in a statement on Friday.
"At a small number of firms the FCA did have concerns when
significant communications took place orally, normally over the
phone, which was likely to have caused some customers to
purchase a standard annuity when they may have been eligible for
an enhanced product."
These firms have been told to review such sales from July
2008 and, where appropriate, provide redress.
The need for proper advice has grown since April 2015, when
the government removed the obligation on consumers to use their
pension pots on retirement to buy an annuity.
Many of the customers in the FCA's sample had modest pension
pots of about 25,000 pounds, making it more important to secure
an enhanced annuity, the watchdog said.
If the FCA had found widespread failures, around 300,000
people might have had reason to claim they had been sold the
wrong type of annuity over the seven-year period.
"It will be a relief to the industry that the FCA has not
found widespread mis-selling," said Jason Whyte, director in UK
life & pensions at consultants EY.
Insurance shares were up around 1 percent on Friday, in line
with a rise in the FTSE 100 index.
($1 = 0.8042 pounds)
(Editing by Elaine Hardcastle and Keith Weir)