Time for root and branch pension reform

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"Pensions mis-selling" has always been a rather quaint euphemism. In a way, rather like the woeful progress of the current "mis-selling review", such polite City parlance allows regulators and the industry to side-step home truths.

Some, especially the victims, their trades unions and who yet knows, Scotland Yard, prefer a quite different description. "Racket" would be one, but that covers a multitude of sins. So for this column "fraud" - for that is precisely what "mis-selling" is - will do.

For anyone with a financial brain who has been cold-called by a pushy pensions salesman - or led so predictably up the garden path to one of those fancy, bells and whistles mortgages - the fact that fraud remains rife is no surprise.

After all, the industry has hardly been caned by its regulatory masters. The Securities and Investments Board and its surrogate, the Personal Investment Authority, instituted their review of the 1980s scandal in October 1994. Meanwhile, thousands meet the grim reaper, while insurers haggle over compensation.

It is all very well for Peter Davis, the chief executive of Britain's largest pensions firm, the Prudential, to play the friendly uncle on TV (and before Mr Davis reaches for his lawyers, we are not accusing him personally of conning you or me for a nice fat commission). But, as a PIA leak to the Independent showed last October, out of 41,000 priority cases, after two years the mighty Pru had offered redress to just 10 of its lucky customers.

Then, the Independent did a huge favour to those who wanted to "name and shame". Now, the newspaper and the World in Action team have done the same again for everybody who believes in decent, fair provision for old age.

It could not have come at a better time. Under the Conservatives' new plans, if John Major remains in No. 10, every youngster's pension will be in the hands of the very same perpetrators caught on film now. Even under Labour's halfway house, with a minimum state pension, the private sector is sure to play an ever increasing role.

Labour's Mike O'Brien has called on SIB and the PIA to get much tougher on the industry. Quite right, but that would probably require a different breed of regulator (not self-regulator) than we have now.

More fundamental, though, is the structure of the pensions industry itself. For every time you are advised by a salesman, whose earnings depend on commission, the system has a bias towards the same result.

Some providers, particularly high street banks, are gravitating against commission-based selling altogether. It is to be encouraged.

Naturally pensions firms, like any other, face the problems of staff incentives. But rewards over a longer period, based on the numbers of people who actually stick with their plans, would mitigate the bias.

Charges and investment performance will determine how much even the longest held personal pension will be worth. But a requirement, too, to spread initial setting-up costs over a longer period would cause firms to think twice before selling a duff policy in the first place.

Maybe after 1 May, the Government might think it over.

In an ideal world...

THIS is my last occasional column as Deputy Business & City Editor before I go off to pastures new. Time then for a little wish list to keep the City on the straight and narrow.

First, the Serious Fraud Office should be given bundles more money - used fivers will do - and a US-style armoury to fight the good fight. The denizens of Elm Street have had a rather good week, with the convictions of Abbas Gokal in the BCCI affair and Robert Feld over the collapse of Resort Hotels. For once, too, Mr Feld's eight-year sentence showed the judiciary taking City fraud seriously. Long may it continue - and in the Scrubs, not Ford Open, which sounds more like a golfing away-day than a place to do time.

The SFO needs bolstering, as its caseload remains bigger than ever: Peter Young, Sumitomo, Wickes and now NatWest, possibly, barely to mention Stephen Hinchliffe, whose disappearance would stop gullible managers of corner tuckshops - like Liam Strong at Sears - ever being mugged in broad daylight again.

Another success (on balance), the Alternative Investment Market, needs more fine-tuning. Last week Alpha Omikron became Aim's third firm to be delisted.

In the past 18 months, the market has raised over pounds 1bn for hundreds of members. In doing so, it has become a serious rival to venture capitalists who so often demand fantastic but, in reality, risk-free returns.

How odd that Aim's embarrassments have been of the likes of Alpha: Bermuda registered firms, based in Monaco, with assets in North Korea and Some-or-other-stan. So what about a new rule? Like no Bermuda firms based in Monaco with assets in ... (drafted in a non-discriminatory way, of course). Oh, and no more Pratts (of the double-barrelled persuasion).

Finally, would-be corporate raiders, too, should be made to show their driving licences, or some other credentials, before launching assaults on bastions of civil society. Lord Hanson may have had many faults, but at least he'd come of age and didn't have a go at our poor old Co-op.

Got a new motor?

SO GOODBYE, too, to the trusty Ford Escort. After 30 years, Ford has decided it is to spend a cool half million coming up with a new name. I have a suggestion. A natural successor, that retains its association with royalty, celebrities and common folk, who've bought the car through the generations.

I know this, because the first (and last) time I was there, within minutes of the Queen shuffling diminutively by, there was a massive punch-up between lager louts outside the oyster bar and Rod Stewart was mobbed by all and sundry. Yes, I suggest the new Ford Ascot. The pounds 500,000 cheque can still be sent via the Independent on Sunday, as I'll be popping in to check my post.