Aviva sold inappropriate pensions - Telegraph newspaper

LONDON, Nov 22 (Reuters) - British insurer Aviva plc (Other OTC: AIVAF - news) is paying compensation and increasing the annual payouts of hundreds of customers after discovering staff sold inappropriate pensions, the Telegraph newspaper reported on Saturday.

Savers with medical conditions including diabetes, high blood pressure and smokers should have been offered an increased annuity - which provides an income for life - based on their lower life expectancy, the Telegraph said.

The newspaper said Aviva discovered some of its financial advisers were making this type of error in a routine check of annuities issued in 2013, finding 250 cases where savers were short-changed.

It quoted a spokesman as saying measures to resolve the matter were put in place "as soon as it was identified".

Aviva could not immediately be reached for comment.

The company said on Friday it had agreed terms for a possible deal to buy Friends Life for 5.6 billion pounds ($8.77 billion), after a government pensions shake-up this year has sharply cut the sale of annuities.

The Financial Conduct Authority said in a review published in February that the annuities market was disorderly, with insurers maximising profits and failing to give the best deal.

"The FCA confirms it's continuing its review of non-advised annuities sales practices by pension providers and expects to publish our findings later this year," an FCA spokesperson said.

The Telegraph said that as many as 100,000 people a year were estimated to have been sold inappropriate annuities between 2007 and 2013. ($1 = 0.6388 British Pounds) (Reporting by Carolyn Cohn and Huw Jones; Editing by Stephen Powell)