Edinburgh pension provider Standard Life Assurance has been fined £2.45m by the FSA, which found that the company had misled 98,000 investors for it's Pension Sterling Fund through its marketing literature.

Customers were informed that their money would be held in cash, although it later transpired that it was actually held in investments, which dropped by 5% last January – an average of £900 each.

Standard Life did compensate investors, at a cost of £103m following complaints.

The investigation by the FSA concluded that marketing material for the fund was ‘not clear, fair and not misleading’, that the literature claimed the Fund was wholly invested in Cash, that no adequate system of controls were put in place to ensure that marketing material issued accurately reflected its investment strategy for the fund, that customer were misled as to the nature of the investments held by the Fund and that it was intended primarily for the investment of pensions and people approaching retirement.

Margaret Cole, FSA director of enforcement and financial crime, said: "The FSA takes the issue of misleading financial promotions very seriously and the fine announced today demonstrates our commitment to the principle of credible deterrence. It is critical that consumers are given an accurate understanding of the nature of investment products and the risks involved. Without this information, consumers are unable to make informed decisions about whether investments are suitable for their individual investment strategy. Throughout 2010 and beyond, the FSA will continue to take strong action when a firm's financial promotions fall short of the requirement to be 'clear, fair and not misleading' and customers have not been treated fairly.

"The failures at SLAL arose because there were inadequate systems or controls in place to ensure that marketing material issued accurately reflected the investment strategy for the Fund. There were also inadequate processes in place to enable effective communication between business areas and committees resulting in a lack of awareness of any divergence between the marketing material and investments held by the Fund."

The FSA also revealed that Standard Life co-operated with the investigations and agreed to settle at an early stage of the investigation, meaning a 30% reduction in the penalty.