Broker could recover £12m of the compensation payments from insurers
Towergate may have to pay compensation of up to £85m for mis-selling financial products through its Towergate Financial division.
The broking group revealed in its 2013 bondholder report that it was working with the FCA on an investigation into Towergate Financial’s sale of enhanced transfer values (ETV) and unregulated collective investment schemes (UCIS).
In its results today, Towergate said it estimated that it may have to pay customer compensation of between £65m and £85m, excluding costs and expenses. It expects to start contacting customers in the first quarter of this year and begin compensation payments in the third quarter.
It does not include payments from Towergate’s insurance policies. The company said it could recover £12m from its insurers.
The company added that it can give no assurances as to whether its ultimate liability will be within this range or lower or higher. The ultimate liability for ETV and UCIS may, therefore, be materially different to this range.
Responding to bondholder questions about the redress payments, Towergate chief financial officer Scott Egan said: “We are not in a position to quantify accurately the liability or potential liability associated with any potential redress and, as I have stated in the Q3 disclosures, customer contact and redress methodology are the two key pillars that we have to get more certainty on before we can quantify that liability.”
ETVs, which have come under fire from The Pensions Regulator, are used by companies as a risk management tool to ease staff pensions costs. To read more about this, read an article from Insurance Times sister publication Engaged Investor.
UCIS is when investors pool their money and a fund manager puts it into an asset class such as bonds, property or shares. The FCA has banned the promotion of these products.