Pension providers set on collision course with PIA

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The Independent Online
Pension providers were set on a collision course with the Personal Investment Authority (PIA) yesterday over their attempt to persuade the regulator not to proceed with tough new deadlines for compensating victims of the pension transfer scandal.

Insurance companies are hoping to win the PIA's backing for a compromise proposal, under which they would write "letters of intent" to policyholders, promising compensation at a future stage.

The most radical proposal, put forward by Legal & General, would involve a guarantee to match any payouts made by a victim's former occupational pension scheme at retirement.

By offering this guarantee companies hope to persuade the PIA to drop its demand that 90 per cent of serious pension cases, estimated at almost 400,000, must be completed and their policyholders fully compensated before the end of this year.

A similar proposal, revealed in The Independent almost two years ago, foundered because companies then insisted on their right to claw back any investment gains made by their funds, above any compensation paid.

A Legal & General spokesman said: "There is a lot of discussion to be held still, but we hope this will be taken as a positive idea."

Indirect backing for the proposal came from Allied Dunbar, whose group compliance officer, Andy Smart, said: "We are committed to ensuring that we put our policyholders right if we have disadvantaged them. If there are other ways of speeding up the process we will look at them."

It is understood that Standard Life and other leading insurers are discussing the proposals.

However, a PIA spokesman said yesterday: "We will continue to require substantial progress in the majority of cases before the end of this year."

Insurance companies are now pinning their hopes on the Securities and Investments Board, the City's most senior regulator, being able to persuade the PIA to accept the compromise. Regulatory sources confirmed that SIB's guidance in 1994 allowed scope for such guarantees to be given. But there may be actuarial difficulties involved.