Workers turning back from personal pension plans: Insurers help miners and NHS employees return to their occupational schemes

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MINERS and health service workers, from cleaners to surgeons, are among those trying to rejoin their occupational pension schemes after misguidedly taking out personal plans.

The life offices who sold them personal pensions are making the requests so the future benefits of these employees can be be restored.

The insurers fear that their representatives may have sold personal pensions when they should have been advising employees to stay in their occupational scheme. This could potentially open the way to compensation claims.

Their action follows a ruling by Lautro,the life and pensions regulator, that every transfer must be reviewed and referred back if an individual has been incorrectly advised to leave an occupational scheme.

A host of well-funded, usually index-linked occupational pension schemes are being flooded withrequests for employees to rejoin. The police, teachers, employees of British Steel, British Telecom and local authorities are in the same position as health workers and miners. They all have index-linked pensions which can rarely be bettered by a personal plan. The exception is where young people with few years service leave their jobs.

National Health Service pension scheme administrators have taken 146 employees back into the scheme with another 29 cases pending, according to the November issue of Pensions Management magazine.

The Mineworkers Pension Scheme (MPS) has reinstated eight former members and is dealing with 250 requests from life offices to review cases of possible mis-selling.

An NHS scheme administrator said the Romford-based life insurance company, Interlife, had generated the most reinstatements. Other NHS cases involve the Prudential, Legal & General, Commercial Union, Barclays Life, Allied Dunbar and Colonial Mutual. Most involved sales made by direct salesmen or tied agents.

The MPS said it was reviewing 80 possible cases from NatWest Insurance Services, 18 from the North of England building society and 28 from Scottish Widows.

The NHS pension scheme rules only allow current employees of the NHS to be reinstated whereas the MPS scheme also lets ex-employees back in.

A spokesman for the NHS scheme said the number of referrals from life offices is increasing.

The life offices are paying for each of the individuals to be restored to the position they would have been in had they never left their pension scheme. The miners' scheme makes an additional administrative charge for reinstating ex-employees but waives this for miners still working. The NHS scheme makes no administrative charge.

The NHS scheme has dealt with 21 reinstatement cases involving nurses being mis-sold personal pensions by a tied agent of Interlife.

'The real losers are those who are ineligible to rejoin because they have left the NHS,' said a spokesman for the scheme. 'We do not know whether the insurance companies are giving these people compensation for poor advice.'

Legal & General pension manager Peter Timberlake said the company would, in theory, top up each pension by an 'actuarially calculated' amount, but was not aware of any cases where this had happened in practice.

Allied Dunbar has made payments in some cases and promised to match the better benefits of company schemes in others.

At the Prudential, the pensions manager Steve Bee said: 'We have had ahandful of cases where we have paid compensation by enhancing the client's personal pension by an appropriate amount. This is calculated by looking at the benefits that the occupational scheme would have given.'

Commercial Union has topped up some personal pension plans in an effort, according to pensions manager, John Bowman, to 'compensate for the lost benefits in the former scheme.'

The North of England building society was publicly reprimanded by SIB recently for giving poor advice on pension transfers and single premium bonds. Forty cases of potentially poor pensions advice have been identified and referred to the MPS for review.

The society's secretary and solicitor, David Hodgson, said that compensation in cases of mis-selling would be a matter of 'individual negotiation.'

NatWest Insurance Services confirmed that 80 cases involving transfer advice had been sent to the MPS for review.

Scottish Widows said that 28 personal pension plans taken out by mineworkers would be entitled to receive benefits on retirement at least as good as those they would have received from the MPS.