City & Business: Pension buyers conned with greatest of sleaze

HAVE I missed something, or are the perpetrators of the greatest fraud in British financial history about to get off scot-free? I refer of course to the deliberate mis-selling of personal pensions by some of our biggest financial institutions.

It now seems probable that more than 500,000 people were improperly persuaded to opt out of employers' pension schemes or urged not to join them in the first place. Instead they were conned by unscrupulous financial salesmen into buying a personal pension.

The cost is anyone's guess, but it will certainly be north of pounds 1bn, possibly pounds 3bn. As a financial scandal the affair dwarfs Barlow Clowes, Maxwell and Levitt added together and will probably match BCCI in scale.

The Securities and Investments Board, the senior City regulator, announced last week its plans to identify and compensate the victims (see our nuts and bolts guide on page 3). Quite correctly, SIB's priority has been to ensure that the wrongs are put right. But in doing so, it seems to have abrogated all responsibility for fingering the guilty and bringing them to book.

All its efforts have gone into designing a workable compensation plan. No thought has been given to how this extraordinary affair could have taken place under the noses of regulators, and identifying who was responsible.

This was not just a series of rogue incidents, a few bad apples giving the financial services industry a bad name. It was a systematic programme to fleece the unwary, sanctioned by very senior people. Some of the biggest and best- known companies in life assurance were at it. Whole professions and occupations were targeted, from teachers to nurses. Take the coal industry: 60,000 miners were persuaded to transfer from occupational schemes to private pensions; pounds 900m of their benefits were transferred. Typically, when a colliery closed, teams of salesmen descended on the pit village.

Rooms were hired, union officials recruited, special promotions devised.

It's hard to see how very senior management in life assurance companies could not have known what was going on. The logistics mean the marketing programmes must have been approved at the highest level. And the volume of highly lucrative business would have been inescapable to the most wilfully obtuse manager.

At best, senior managers turned a blind eye to what was going on. More likely, they helped orchestrate it, aided and abetted by ill-trained salesmen, hungry for commissions. As a result, hundreds of thousands of people have suffered needless anxiety. Some have had to make do with a smaller pension. Some have gone to their graves fearing that their dependants will not be properly looked after. Yet no heads have rolled. No organisation has been punished specifically for the mis-selling of pensions.

The worst any has suffered is a fine of a few hundred thousand pounds for non-compliance with the Financial Services Act - flea-bites to organisations whose reserves are measured in nine figures.

It's hard to find anyone in the industry prepared to express regret, let alone apologise. The statement put out by Allan Bridgewater, group chief executive of Norwich Union and chairman of the Association of British Insurers, in response to the SIB plan, was a masterpiece of buck-passing and complacency.

The rules on pension selling have now been tightened up. Systems have been changed. And new regulations on disclosure from 1 January should make things clearer to customers. But the fact remains that many of the ethically challenged people who allowed this scandal to take place are still in senior positions in our biggest financial institutions. That's the big sleaze story of the week.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent