SCOTTISH Widows' chief executive, Mike Ross, warned members yesterday of the ''significant strain'' which its investigation of non-priority pension mis-selling cases would place on other parts of the business, writes Ian McConnell.
Addressing 140 members at the life and pensions office's annual meeting in Edinburgh yesterday, he said: ''During the past year, the new Government has made significant efforts to speed up the progress of the pensions mis-selling review. Within Scottish Widows we have completed over 90% of our review of priority cases and have started . . . on a similar exercise for those cases designated as non-priority.
''It is concerning, however, that the level of resources required to complete the exercise is likely to place a significant strain on the other operational areas of our business.''
Ross revealed it had cost Widows about #5m in administrative costs to investigate priority cases, compared with the #2.5m actually paid out in compensation.
Charles Thomson, Widows' operations director, estimated the administrative cost of reviewing the non-priority cases at #10m. Ross said Widows might need between 80 and 100 people to work on these, and some recruitment would be required.
Thomson said accountancy firm Price Waterhouse had estimated that administrative costs would be 15% of the amount paid in compensation and added: ''It is certainly miles away from our experience. We are running at something of the level of 200%.''
He estimated this might fall to between 100% and 150% in phase two.
Ross had earlier told the meeting that Widows' investment performance had been ''an area of some concern in recent years''.
Scottish Widows Investment Management's (SWIM) recently-appointed chief executive, Orie Dudley, echoed these sentiments but added: ''We are determined to build a global investment business of the highest quality, headquartered in Edinburgh.''
Widows lost mandates to manage more than #1000m for third-party clients last year. But it has recently enjoyed significant success in attracting mandates from US organisations looking to invest money in Continental European stock markets.
Dudley said SWIM had recently won another major US mandate. SWIM director Allan Mckenzie said funds under management from US clients, which rose from $200m to $800m last year, had increased to $1500m (#900m).
Meanwhile, Ross reiterated Widows' wish to remain mutual and independent, following recent rumours that a major announcement on its status was imminent.
Royal Bank of Scotland, a strategic ally, has said it would be interested in talking to Widows if it changed its mind.
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