Personal Finance: Pensions clawback

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THE SHARES of the large insurance companies were rocked on Friday as rumour swirled around the City about the contents of the latest pensions report due out at the end of the month.

This report will face up to the damage done by over-enthusiastic selling of personal pensions to those who would have been better off staying in their company schemes. The City has discarded its previous estimate of compensation due from pension companies of around pounds 1bn. It now puts the bill at between pounds 1.5bn and pounds 2bn.

This money willnot flow into the hands of those who now regret taking out personal pensions but will be used to buy them back into the company schemes they left.

Workers who had moved on and wanted to extract their pensions from their previous employer need to be viewed differently from those who were persuaded to leave their current employer's scheme.

The case against starting a personal pension to mop up 'old' pensions is much less clear cut. Workers who felt some animosity for their former employer or who were keen to keep a close watch on their pension may have positively asked for a transfer, ignoring all considerations of certainty, gain and risk.

But anyone who advised a personal pension for those who were giving up a pension contribution from a current employer - especially those in good public-sector schemes with index-linking - was suggesting a jump from known, calm, warm waters into a shark-ridden whitewater ride.

It is likely that those who were persuaded to leave perfectly good schemes will be in line for chunks of compensation, so they can buy back into their company schemes without loss of benefits. Returning the transfer value from the company scheme, which was invested in a personal pension, may not be enough after accounting for the costs of setting up the personal pension and the terms for calculating the transfer value.

It may also take a heavy hand to persuade the company pension schemes to take back the renegades at all.

SLOWLY and surely those holding savings accounts with the Cheltenham & Gloucester Building Society are being sorted into those who stand to gain an awful lot, a goodly amount and nothing at all.

Last week, savers with share accounts who seem to be outside the enchanted circle received a letter giving them a last chance to make a case to qualify for a portion of the spoils of the pounds 1.8bn that Lloyds Bank will pay for the society.

The main hurdle is two years' continuous membership. Many will fail this because their eye was caught by the launch of the London Deposit Account, which seemed to offer a better deal than the long-standing London Share Account.

Others will have closed a joint account to take advantage of the separate taxation of husbands and wives and put the money into an account in the wife's name. If this was changed again to a joint account in the name of Mr and Mrs X, perhaps on the retirement of the husband, then the membership rights would have bounced from him to her and back to him - breaking up any continuous membership and the right to that payment.

But Paul Rivlin of the C&G Alternatives protest group says that the Abbey National flotation established a precedent that a society's records were not the final word on membership. If the couple had asked to have the husband's name added to the account and intended the wife to remain the main member, then in spite of the account being in the names of Mr and Mrs rather than Mrs and Mr, there is a case that membership of the society remained with the wife.

As qualifying savers stand to gain pounds 500 per account plus 13 per cent of balances up to pounds 100,000, there is a lot at stake (up to pounds 13,500) for some investors. Will anyone challenge the C&G's rulings?