The Personal Investment Authority said it was "very concerned" that some financial advisers had failed to keep basic records required to show they had explained the risks of the plans and given their customers proper advice. The PIA said it was commissioning further research which, if it shows mis-selling, may lead to fines and discipline for the firms involved. Pension withdrawal plans, also known as income drawdown, began to be sold in 1996. They allow investors to draw income from their pension savings, without handing over their entire fund in exchange for an annuity.
The plans have been sold in increasing numbers since annuity rates fell to 30-year lows. Someone with a fund of pounds 100,000 now typically gets an annuity income of pounds 8,000 or less, against pounds 13,000 eight years ago. However, the capital invested can shrink if investment returns are low. The plans require high returns to match annuity benefits, and to compensate for paying the salesperson's commission.
The PIA said firms failed to record customers' attitude to risk, income requirements and investment objectives - factors that are considered crucial to a proper sale.