LETTER : Investors pay for personal pensions

From Mr James Roberts

Sir: Your report (19 April) gives details of the large amount of money which might be paid to those wrongly advised to arrange personal pensions. You omitted to mention where the money might come from.

The financial services industry is large and complicated. It includes product providers, internal and external sales organisations and regulators, however looking at the industry as a whole, there are only two sources of revenue feeding three areas of expenditure.

Money going into the financial services industry comes from the investing public and the net return on investments. Of this, approximately 85 per cent is paid as benefits to investors, 10 per cent pays salaries, bonuses and dividends to shareholders and 5 per cent covers overheads such as rent and paper.

Any compensation has to come from this pot of money. There is little scope for taking it from the salaries portion - much of this is the cost of regulation which has snowballed as a result of the personal pension review. The only way the industry can pay compensation is by reducing the benefits paid to other investors. The main losers are likely to be those who have held with profits policies for a long period of time.

Yours faithfully,

JAMES ROBERTS

Beckenham, Kent