Insurance firms may have to pay pounds 3bn in pensions scandal

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The Independent Online
The insurance industry may have to pay compensation totalling more than pounds 3bn to 1.5 million customers who were wrongly sold personal pensions, many times more than estimated when the scandal broke a year ago.

Anthony Nelson, the economic secretary to the Treasury, pinned the blame on the insurance industry which he said would pick up the tab. But much of the cost is bound to fall eventually on the insurance companies' policyholders.

The scandal is a severe embarrassment for the Government, which in 1988 put its full weight behind the selling of personal pensions.

The bill emerged from estimates of the number of people who may have lost money taking out personal pensions instead of joining or staying in company schemes. The Securities and Investments Board, the senior financial regulator, estimated that 350,000 of the cases were especially urgent and said they should be dealt with by the insurance industry over the next two years.

The high costs of compensation will ruin many small financial advisers.

Pensions debacle, pages 28, 29