Rogue pension firms face freeze
Labour will deny lucrative welfare reform business to companies dragging feet over settling 'mis-selling' claims
Sunday 25 May 1997
The insurance industry expects the Government to introduce pensions reform during this parliament that will rely heavily on the involvement of private sector pensions providers.
Social security minister Frank Field, who will drive the pension reform, is a long-time supporter of compulsory contributions to private pension plans.
But the industry has been given the impression that backsliders on pensions mis-selling will not be invited to participate in what would be a multi- billion pound sales opportunity.
"It is an open secret that the Government will not give work to anyone who is seen to be dragging their heels on pensions mis-selling," said a senior industry source.
The Government will use plans for pensions reform as a stick and a carrot with which to encourage the industry to resolve the long-running saga.
Helen Liddell, Economic Secretary to the Treasury and minister in charge of City regulation, said she was "reserving judgment" on how the Government would use the issue to bring the industry into line.
"We will learn how they handle the matter of pensions mis-selling over the next few months. It is up to them to influence how they are to be treated by the Government," she said. Because of her "deep dissatisfaction" with the way pensions mis-selling had been handled, she was taking personal charge of the issue and would be demanding monthly updates, in person, from the chief executives of all the pensions companies with outstanding mis-selling claims against them.
"I am going to want answers. I will hold them personally accountable for their actions. I will be publishing the responses as I get them, because people are entitled to have as much information [as possible]," Ms Liddell said. "These are serious management issues, and the executives in charge of these companies cannot detach themselves from them."
She described the attitude as the "not me guv" culture. "It is self-evident that self-regulation has not worked in the way it should have."
Ms Liddell confirmed that the Personal Investment Authority, which will in effect become a subsidiary of the Securities and Investments Board in July when Howard Davies takes control of the latter, would be abolished and its functions, along with those of the other self-regulatory organisations, would be assumed by the SIB.
The PIA has been the butt of criticism over its handling of the pensions mis-selling affair, with most cases unresolved four years after coming to light. Ms Liddell said there was still "a huge raft of people who do not even know they are victims - over a million, by some measures".
Industry executives have been heartened by the Government's decision to overhaul financial regulation and believe this will help break the damaging logjam. One leading pensions provider estimates that it could resolve 25 per cent of its smaller outstanding mis-selling claims overnight but has been prevented from doing so by the PIA. Others have been perplexed by the shifting framework in which the mis-selling question is being addressed.
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