Fresh evidence confirms that private top-up pensions are poor performers

A FEW MONTHS ago, we published a front-page story in this section to the effect that the Personal Investment Authority, the financial watchdog, was preparing (no more than that) to investigate sales of privately-provided top-up pensions.

The story came at the same time as a report by the specialist magazine, Pensions Management, showed that private pension top-ups, called FSAVCs, delivered far worse returns than those made available to employees from their own employers and known as AVCs.

After the article appeared, I was deluged by letters and phone calls from readers, telling me of their experiences when they sought to increase their future retirement income. All sorts of spurious reasons were given by their financial advisers as to why they should opt for FSAVCs in preference to AVCs. Strangely, the most important reason - that an adviser stands to make many hundreds of pounds in commission by selling an inappropriate product - was never among those reasons.

At the same time, I received a handful of "more in sorrow than in anger" letters from advisers themselves. Some put forward cogent reasons why they had, in some individual cases, recommended FSAVCs. A few preferred to operate on the basis that if you insult a journalist the problem of mis-selling will go away.

This week another report on FSAVCs lands on my desk. It is from Bacon & Woodrow, the highly-respected firm of independent actuaries. It makes worrying reading: on average, in-house AVCs outperform their private counterparts by 10 to 15 per cent over 10 years. This, as Bacon & Woodrow note, is the equivalent of more than one year's premiums.

The report comments: "We believe further research is needed in relation to FSAVC sales. This should include a review of the providers' files to establish the reasons for members taking out FSAVCs, where these are seen to be inappropriate." In other words, Bacon & Woodrow is itself calling for an investigation which financial regulators have dithered over for years, since the possibility of massive mis-selling was first aired.

Another useful suggestion is that any person considering a top-up should be provided with comparisons of investment options and charges between their company-provided AVC and the privately-sold FSAVC.

A SOLICITOR I know is being sued by a large mortgage lender. The lender, a former building society, wants compensation for the fact that one of its borrowers defaulted on his mortgage and walked off owing tens of thousands of pounds.

The solicitor is alleged to have made a tiny error in the conveyancing process, where he was acting on behalf of both lender and borrower - one which, it should be stressed, had no impact whatsover on the default. The lender, of course, will accept no responsibility for its willingness to offer a dodgy prospect a 100 per cent mortgage during the early Nineties, when house prices were plummeting.

Similar stories form the background to a decision this week by the Law Society that its members should no longer act on behalf of both lenders and borrowers at the same time. This will make buying a house more costly. The next time mortgage lenders whinge about the housing recession, remember who is to blame.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
i100

Other places that have held independence referendums
Sport
Jonas Gutierrez (r) competes with Yaya Toure (l)
football

Newcastle winger Jonas Gutierrez reveals he has testicular cancer - and is losing his trademark long hair as a result

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Arts and Entertainment
Blossoming love: Colin Firth as Stanley and Emma Stone as Sophie, in 'Magic in the Moonlight'
film

Actors star in Woody Allen's 'Magic in the Moonlight'

News
peopleThe Times of India said actress should treat it as a 'compliment'
News
news

Watch this commuter wage a one-man war against the Circle Line
News
We are phenomenally good at recognising faces; the study showed that humans have been selected to be unique and easily recognisable
science

Human faces unique 'because we don't recognise each other by smell'

Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
A male driver reverses his Vauxhall Astra from a tow truck
news

Man's attempt to avoid being impounded heavily criticised

Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    IT Portfolio Analyst - Prince2

    £45000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our client, a glob...

    Project Co-ordinator - Birmingham - Permanant

    £20000 - £25000 Per Annum Plus excellent benefits: Clearwater People Solutions...

    Head of Maths

    Negotiable: Randstad Education Group: Head of Maths position at a prestigious ...

    Trainee Recruitment Consultant - Birmingham - Huxley Associates

    £18000 - £23000 per annum + Commission: SThree: Huxley Associates are currentl...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week