Martin Broughton, BAT's chief executive, also criticised the Personal Investment Authority, the new investor protection body backed by the SIB. Mr Broughton said the PIA's defects will soon be evident: 'This will lead to, in a matter of only two or three years, the whole system being looked at again and overhauled again.'
The KPMG Peat Marwick report on personal pension transfers, commissioned by the SIB, has been interpreted as showing that up to nine out of 10 people who switched pension benefits from an occupational scheme to a personal plan may have received bad advice.
The KPMG study, which is based only on written customer records, categorised many pension transfers as 'unsatisfactory and suspect'. Mr Broughton said: 'That's a fair appraisal of both the KPMG report itself and the SIB's handling of this whole matter.'
He said that the KPMG report had failed to consider the role of the consulting actuaries who advise pension funds on what represents a fair transfer value. It was unrealistic to suggest that financial advisers should have challenged figures prepared by actuaries. The report also failed to examine the standards of the banks and building societies, who are regulated by the SIB itself. Mr Broughton added that the SIB was clearly using hindsight in drawing up guidelines for compensation. Although Allied Dunbar had about 5 per cent of the market, BAT has made a provision of less than pounds 10m to cover its potential exposure.
Many in the life insurance industry are unhappy with the way the SIB used KPMG's report on personal pension transfers, but Mr Broughton's remarks are the most outspoken criticism so far.
Mr Broughton said BAT was 'frankly disappointed' with the PIA's prospectus as it failed to concentrate on the key area of training and competence. The proposed set- up would involve 'serious and unnecessary duplication' by having public interest representatives on the board of both the PIA and the SIB itself. He said there seemed to be 'confusion' whether it offered self- or statutory regulation.
Despite its doubts, Mr Broughton said BAT's companies would probably go along with the PIA as an 'unenthusiastic supporter'. Although other large insurers are opposed to the PIA, BAT is concerned that any attempt to block the agency would be seen as an attempt to protect the industry's self- interest.
National Westminster Bank said yesterday it had decided in principle to join the PIA. However, it still wants to clarify some issues.
Jim Stretton, deputy managing director of Standard Life, told a committee of MPs that the industry had gone beyond the point where self-regulation could work. A more accountable regulator was needed.
In a written statement, he said: 'We are in a vicious circle where low public confidence leads to pressure on regulators to be seen to be severe and to increase the range of their expectations of the industry. The regulators' response then causes a further diminution in public confidence.'
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