Non-commissioned crisis

A few words of advice for anyone about to sign up for a personal pension from a life insurance salesman or independent adviser: don't do it. You could get caught up in a (you guessed it) personal pensions mis- selling scandal.

Next week the Financial Services Authority (FSA) will issue guidelines for would-be pension buyers. (Phone 0845- 606 1234). Financial salespeople will be told to stop selling personal pensions with massive upfront commission payments. Currently, an IFA selling you a pounds 200-a-month personal pension plan would receive about pounds 1,800. Not bad for a few hours work.

You may think all this is unjustifiable anyway, but it's been going on for years and these advisers have to make a living. For every client who buys a lucrative pension, they may have seen 10 people who bought nothing but got free advice. It's the same story across the whole crazy world of financial services. (You can beat the system - see page 11 for how to buy a last-minute PEP without paying a penny towards someone else's financial advice).

The clampdown on pension commission payments is down to Government plans to introduce stakeholder pensions in 2001. All workplaces that don't offer any pension scheme will have to offer a stakeholder pension. Many thousands of people will want to swap an existing personal pension for a stakeholder scheme at work. And the self-employed and others outside normal offices may also want to buy into these low-cost American-style portable pensions. (One attraction is that we'll be able to stick pension money into unit and investment trust funds run by specialist fund managers, which tend to perform better than many of the equity funds run by life insurance companies.)

The price of paying lots of upfront commission is that very little of your money may be invested for the first two years. Hence the FSA's move to ban upfront payments in the run-up to 2001. According to pensions researchers at BEST investment, worst offenders include Allied Dunbar and Legal & General. Add on some nasty penalties if you try to move your money within a few years of taking out the pension (step forward Norwich Union, NPI and Axa Sun Life) and you could have some upset investors.

There are cheap ways to buy a personal pension. Contact a discount broker such as BEST (0171-321 0100) and Hargreaves Lansdown (0800 1382121). Do you really want to pay someone pounds 1,800 to sell you a savings scheme?