RBS pays out £500k after mis-selling annuity to dying man

Royal Bank of Scotland (RBS) has been ordered by the Isle of Man regulator to pay compensation to the family of a man following a mis-selling investigation.

In December, it was revealed that 80 year old cancer sufferer Norman Hensher was sold a £500,000 annuity by an adviser from Isle of Man Bank (IOMB), a subsidiary of RBS, despite having a severely-reduced life expectancy.

Hensher died before receiving any of the annuity. Aviva, which supplied the annuity, pocketed £485,000 whilst the RBS adviser who sold the policy kept a commission of £15,000 from the sale.

However, following an investigation, the Isle of Man Financial Supervision Commission (FSC) ordered RBS to pay £500,000 to Hensher's relatives.

The FSC's investigation found that the IOMB adviser did not press Hensher for more details about his life expectancy, and, if it had, would have found an annuity was unsuitable for him.

"IOMB failed to follow fully its own internal procedures in relation to the sign off of the recommendation and disclosures to be made to the client," the FSC said in a statement.

"In accordance with those procedures, due to the lack of disclosures, the plan and advice would have been deemed to be unsuitable by IOMB."

The regulator has ordered IOMB to review all sales to customers aged 70 and over since January 2008 and to reform its internal procedures.

It is also conducting a separate investigation into the behaviour of the individual salespeople involved.

"This case has highlighted the need for all financial advisors to ensure that ill health and life-expectancy issues disclosed by a client are properly understood, taken into consideration and fully documented in the licenceholder's records when providing medium to long-term investment advice to all clients," the FSC said.