The FSA says Standard Life could have faced a heftier fine of £3.5m
The giant pension provider Standard Life has been fined £2.45m for publishing misleading literature about one of its investment funds.
The Financial Services Authority (FSA) said the firm had misled 98,000 investors in its Pension Sterling Fund.
They were told all their money was in cash when it was mainly in much riskier "asset-backed" investments.
Last January they were told their investments had dropped suddenly by 5%, an average of £900 each.
The investors were subsequently compensated by Standard Life, at a cost to it of £103m, after angry complaints from investors and financial advisers.
But the FSA said the firm had been guilty of serious mistakes that had led to the publication of misleading marketing material.
"The failures at Standard Life arose because there were inadequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the fund," said Margaret Cole, the FSA's director of enforcement and financial crime.
"Customers were... misled as to the true nature of the investments held by the fund and as a result, they were given misleading information on the risk of capital losses," the regulator said," she added.
The FSA said Standard Life would have been fined even more, £3.5m, had it not taken steps to remedy the problem and co-operated with the FSA's investigation.
The Edinburgh-based insurance company repeated the apology it made a year ago.
"We have learned important lessons from this mistake and have made significant improvements to our marketing literature processes to prevent the same thing happening again," it added.
The FSA's investigation found that the publication of misleading information about the fund, worth £2.2bn, had spanned the time from July 2006 to February 2009.
The problem was particularly important as the fund was targeted at people approaching retirement.
The investigation also found that Standard Life had been slow to deal with the issue once concerns had been raised.
"In particular, from September 2007 onwards various complaints were made by consumers about the nature of the fund and the underlying assets, given the description of the fund in marketing material, and concerns were also raised by employees of Standard Life," the FSA revealed.
The regulator discovered that staff had noticed that fact sheets for the fund were misleadingly claiming it was 100% invested in cash, but little was done to deal with the problem.
"It was a complete cock-up, but they dealt with it well and said they would reimburse people quickly," said Nick Bamford of IFA Informed Choice.
Robert Reid, of chartered financial planners Syndaxi, was less charitable.
"There was a timing gap between when they discovered this and when they let us know," he said."
"This was a great lesson in how not to handle a problem," he added.