Plan to help victims of mis-selling slated

Click to follow
The Independent Online
A LEADING professional body has called on the City watchdog, the Financial Services Authority, to change radically its proposals to deal with the next stage of the pensions mis-selling scandal. The Institute of Actuaries says that the FSA risks wasting money and resources - and depriving urgent cases of speedy compensation - unless its plans to deal with the pounds 11bn crisis are improved.

And it says the FSA's policy for the second stage of the pensions clear- up lacks focus.

The institute governs the country's actuaries, who have played a critical role in the pensions debacle, including assessing the compensation due to the victims of mis-selling. In a submission to the regulator, it says that "available investigative resources will be spread too thinly".

"This would mean that victims who need help most, such as those who were persuaded to opt out of employer-funded schemes, may have to wait a long time before they know what compensation they will receive."

However, the stance of the institute will unnerve some who fear that victims would be let down if its recommendations were to be adopted. Zohra Francis, a pensions officer at the public sector union Unison, said: "I believe all the cases should be addressed. In practice, you find people are caught up in more than one category. And there is no reason why one group should carry less urgency than another."

The institute believes its arguments carry weight. Roy Brimblecombe, chairman of the its pension review committee, said: "We are disappointed that the FSA has suggested an unfocused approach to the second stage of the review, when a more targeted approach is required. Too much attention is being paid to marginal or inappropriate cases, which means that substantial, unnecessary additional costs will be incurred. It will also delay the payment of compensation to those who really need it," he said.

The FSA is consulting over Phase Two of its review of the pensions mis- selling affair. Phase One was for people close to or past retirement, who had been wrongly sold pensions. It is estimated that this group's compensation bill will total pounds 4bn-pounds 5bn. Phase Two is for people more than 15 years away from retirement and numbers up to 1.8 million people. Compensation in this tranche could reach pounds 6.6bn, bringing the final cost of the scandal to pounds 11bn.

In the later-stage cases, the institute wants to see the FSA concentrate on employees who opted out of occupational pensions schemes and joined a private pension. These are usually people who left jobs or were made redundant. There are believed to be up to 154,000 in this situation, and their average losses run at pounds 3,500 to pounds 7,520 per person.

It also wants so-called non-joiners reviewed, who number some 628,000 cases with average losses of pounds 2,250 to pounds 12,000.

But those who took out rebate-only policies, numbering 330,000, and spread across opt-outs and non-joiners, should be dropped from the review, according to the institute.

An FSA spokeswoman said: "We have laid down what we think policy should be, but we're prepared to listen to arguments and we will weigh them from an investor protection viewpoint."

Comments