Pensions scandal continues

Bad advice remains widespread despite efforts to clean up the late 1980s legacy

The UK pensions industry is still guilty of widespread "mis-selling", despite a three-year review to clean up the scandal that left millions of people with inadequate policies from the late 1980s.

The revelations, in a Granada TV World in Action documentary tomorrow, will severely embarrass the Government, which only last month pledged to privatise the state pension and so leave provision wholly in the hands of the private sector.

Barclays Life, Abbey Life and London & Manchester Assurance are among 10 firms, most of them household names, secretly filmed giving bad pensions advice.

Owing to legal advice and time pressures, the film-makers have not named the other seven. But the Independent on Sunday has learnt that one is Allied Dunbar, the insurer owned by tobacco giant BAT Industries.

Allied Dunbar became so concerned at the prospect of appearing on the programme that it hired a specialist media consultant, a former World in Action researcher, to mount a damage-limitation exercise.

It escaped being exposed on film because Granada's lawyers felt that under guidelines laid down by the Independent Television Commission, the programming watchdog, it was not given enough time to answer the allegations.

The revelations of continued abuse by commission-hungry salesmen come on top of disturbing new evidence of raw deals on pensions. Joint research by the Independent and World in Action shows that hundreds of thousands of pensions sold last year will be worth less when they are halted than the amount paid as contributions because of massive up-front charges.

Those mostly at risk are people made redundant, women who take career breaks and those who find work in which they are able to join alternative company schemes.

Hundreds of millions of pounds from tax and national insurance rebates are also subsidising high charges every year.

The new evidence drew an angry response from Labour, which is due to unveil its alternative pensions proposals shortly. "It is time the industry cleaned up its act for the future. It is time that the personal pensions mis-selling scandal was cleared up. It is appalling that the Conservatives have allowed this to continue," Labour's City spokesman Mike O'Brien said.

City regulators started their review of the 1980s scandal in 1994 after more than 1.5 million people were wrongly advised to switch from occupational pension schemes to private policies.

So far, however, only 6,810 people have been compensated out of 558,370 cases identified for priority review. More than double the former number have died before receiving redress.

In all, only pounds 61m compensation has been handed over by insurers out of a total estimated liability of up to pounds 3bn.

In the documentary, a female World in Action researcher posed as a contract worker, with uncertain job prospects from September, and plans to start a family.

In each case, salesmen from the 10 firms advised her to take out various types of personal pension, even though she may quickly have been unable to afford the contributions and would have lost her investment because of up-front charges.

Barclays, Abbey Life and London & Manchester all declined to appear on the programme. In statements, both Barclays and L&M rejected the criticisms, while Abbey Life admitted "the recommendation made by the salesman may not have been best advice". Allied Dunbar did not return calls this weekend.