The OFT said its inquiry, covering personal pensions and their relationship to occupational schemes, would be aimed at restoring consumer confidence in the industry in the wake of the pension mis-selling scandal. Its report, expected in mid-1997, will include a series of recommendations for ministers and other watchdogs, including the Securities and Investments Board.
The SIB and its junior partner, the Personal Investment Authority, recently issued their own guidance on the pension transfer scandal, which affected 1.5 million people, together with strict guidelines on the way personal pensions should be sold in future.
The OFT investigation comes in the wake of the 1995 Pensions Act, introduced to clean up occupational schemes in the wake of the Robert Maxwell affair. The House of Commons social security select committee is also carrying out its own inquiry into pension provision.
John Bridgeman, director-general at the OFT, said: "At a time when consumers are having to become more pro-active in the way they provide for their retirement, there is also increasing unease about pension products and the selling methods employed by the industry.
"People are now more worried about living too long to provide a comfortable retirement than they are about dying early.
"Our research will cover consumer experience and the structure and regulation of the industry to see what lessons can be learned from the past and what changes can be made to improve consumer confidence."
The OFT added yesterday that a specific area of investigation would be that of the "potential for detriment" faced by groups such as the self- employed, women and ethnic minorities, who may be disadvantaged by the current personal pensions regime.
Pensions experts have repeatedly argued that funding restrictions mean women and the self-employed, whose earnings may be irregular and who often take career breaks, may not be building up sufficient pensions for their retirement.
Anecdotal evidence from insurers has also suggested that a larger than average proportion of people from ethnic minorities are not making adequate pension provision.
This potential for detriment will also be taken to include whether some people find the whole subject so confusing that they may not be getting the right sort of pension or may be putting off making a decision altogether.
The OFT's inquiry will, however, range far beyond the personal pension arena and into occupational schemes, examining international alternatives to the UK, including systems in place in Australia, Chile, Singapore and Canada.
The investigation is being spearheaded by Geoff Horton, head of the consumer protection team at the OFT.
He said that the OFT's decision to investigate pensions had been a long- standing one, which was being carried out now because of the additional resources it could devote to the issue.
Mr Horton will be assisted by David Harris, an official from the Australian Competition and Consumer Commission, the equivalent of the OFT.
Mr Harris, who is on secondment at the OFT, has studied pensions systems in a number of countries.
While talks had been held with several organisations, including the Treasury, Mr Horton denied that the investigation had been officially prompted.
The TUC, which has described the mis-selling as "one of the greatest financial scandals of all time", said it was pleased the OFT was investigating.
Unison, the UK's biggest union with 1.3 million members, which is suing several insurers on behalf of members, said it hoped the OFT would look at those who had been disadvantaged as well as ways of protecting people in the future.
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