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?

i.berwick@independent.co.uk

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?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map