Insurers give secret pension battle cash
Monday 13 February 1995
The companies are pouring thousands of pounds into a campaign fund set up by an independent advisers' trade body, the Independent Financial Advisers Association.
The fund aims to use the law to scupper guidelines set by the City's leading regulator, the Securities and Investments Board, aimed at identifying victims of poor pension transfer advice and paying them compensation.
Insurers' secret donations come as the Personal Investment Authority, which regulates the financial industry, meets tomorrow to issue tough rules to its members on compensation.
Garry Heath, chief executive of IFAA, said: "We have so far raised more than £30,000 for our fund. A large proportion of that money has come from our members. We are also receiving thousands of pounds in donations from product providers, including some insurance companies.
"The donors are preferring to remain anonymous because they do not want to be seen as directly challenging the SIB. But we are confident that much more support will be forthcoming from them."
However, the Association of British Insurers, which represents the industry, said it would not be supporting the legal campaign.
Tony Baker, deputy director-general, said: "I do not know of a single company that has made donations. The ABI is not a party to it and we do not support it.
"We are not sure of the validity of the legal case being put by those opposing the SIB. Secondly, an awful lot of our members want to get the review behind them. Each day this business goes on it damages the industry in the eyes of the public."
A PIA spokeswoman declined to say what the regulator's board would decide to do tomorrow. "The board will be meeting to discuss the question of pension transfers in the light of its consultation process with members."
However sources close to the PIA said board members were being strongly advised to set the guidelines they want and face any legal consequences.
The PIA is facing the threat of legal action because it wants advisers to contact their clients and suggest that they may be entitled to redress.
A report by the SIB in November said that up to 1.5 million people might have been wrongly advised to shift out of their occupational pension schemes and set up private ones.
Some 350,000 cases may need urgent compensation, which is likely to total at least £3bn. Independent advisers were involved in about a third of all transfer cases. They face potential claims totalling hundreds of millions of pounds.
The advisers claim that ordering them to contact their clients would be in breach of the Financial Services Act, because the onus for encouraging a compensation claim should be on the client, not on them.
The IFAA has already won a court order restraining a smaller regulator, the Insurance Brokers' Regulatory Council, from implementing the guidelines among its own members.
A High Court judge agreed to the order two weeks ago pending the outcome of a judicial review to determine whether the guidelines were in breach of the Financial Services Act.
The review, which will not be heard for several months, has thrown into chaos a large part of the compensation mechanism for pension transfer victims.
According to the actuaries Bacon & Woodrow, the delay is likely to add £100m a month to the total cost of compensating victims. The increased costs come because those affected are left holding on to an inappropriate pension when they might otherwise be put back into their company scheme.
The delay also puts increased pressure on a newly formed redress system for small investors, the PIA Ombudsman scheme. Transfer victims denied redress through other channels may take their cases to the new scheme instead.
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