New pensions row faces PIA
A furious row has broken out between the Consumers' Association and a leading financial services regulator over a deal which risks leaving tens of thousands of victims of the pension transfer scandal without compensation.
The consumer watchdog has accused the regulator, the Personal Investment Authority, of watering down its instructions to financial advisers involved in mis-selling personal pensions.
The row, over letters advisers must send out to clients who might have been given bad advice, will drag in Treasury ministers. They have backed the new agreement, announced on Friday, between the regulator and specialist insurers.
Professional indemnity insurers, who will foot most of the compensation bill for pensions mis-selling, have waged a bitter campaign against the original form of the letters because they stated that victims had a right of redress. This opposition sparked a mass boycott by financial advisers of the pensions review first ordered by the regulator nine months ago. After months of talks, the PIA gave way to insurers last week, and removed any reference to compensation from the letters.
The Consumers' Association yesterday attacked the deal as a climbdown that would lead to far fewer victims having their cases reviewed to see if they are entitled to any compensation.
Philip Telford, a senior researcher in the CA's money policy group, said: "We are keen to see any blockage cleared.... but we would also be very disappointed at any weakening of the original review letter. The reality is that many people do not respond to these letters even when prompted. Taking away the part about compensation removes an incentive for them to do so.
"One must also ask why it is that the PIA has changed what must clearly have been its preferred letter. If the wording was right in the first instance, why is it not so now? There seems no doubt that [the PIA] backed down under the instructions of the insurers."
The PIA claimed its change of mind broke the logjam preventing hundreds of thousands of urgent cases from being reviewed. Joe Palmer, PIA chairman, said: "I am very pleased that constructive discussions with a number of leading insurers will enable the review process to go ahead."
The insurers had argued that to send letters telling people they might be entitled to compensation meant inviting claims against themselves. They feared paying out hundreds of millions of pounds in compensationand threatened that if the original letters were sent out they would refuse to foot the bill.
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