View more on these topics

3bn review for contracting out

Pension firms battling against full-scale probe

The pension industry is desperately trying to fend off an FSA investigation into contracting out of Serps which sources say could cost IFAs and insurers up to 2.8bn in compensation.

Money Marketing understands that product providers are lobbying for a voluntary review of contracting out to avoid a full pension-review-style investigation and the prospect of further retrospective regulatory action.

Although the FSA found no evidence of widespread misselling in its initial investigation, it is understood that the regulator now wants to conduct a further review as it believes that between 1987/88 and 1996/97, 200,000 to 250,000 people contracted out of Serps despite being above the pivotal age.

The pivotal age is the age over which it is considered too risky to contract out and was typically 40 for women and 45 for men at the time.

Research commissioned by the FSA last year showed losses for a 50-year-old man who contracted out between 1987 and 1997 could be 17,695 and 9,952 for a 45-year-old man.

If the average compensation is 14,000 and 200,000 people were compensated, the cost could reach at least 2.8bn.

Scottish Widows head of pensions market development Ian Naismith believes the majority of sales were fair but warns that the poor quality of sales documentation in this period could place firms at risk of misselling claims.

The FSA, which has pledged to avoid retrospective action, is understood to be holding a board meeting shortly but says it will not announce anything until next year.

A source says: “Yet another review to go with pension misselling and endowments would be a big financial cost to the industry and a PR disaster. The industry is trying to head this off at the pass by agreeing to review these cases without being formally ordered to do so.”

Which? principal researcher Teresa Fritz says: “It would not be satisfactory for the industry to conduct its own review. We would want a full-scale review but, failing this, we need compensation levels to be sorted out as compensation levels in the pension review were inadequate.”

Informed Choice managing director Nick Bamford says: “SIB concluded in 1996 that the vast majority of people who contracted out of Serps were massively advantaged.”

Comment, p49

Recommended

Osborne rejects calls for tax-cutting plans

George Osborne has rejected calls to cut taxes from the right of the party, claiming that there is “no such thing as a tax-cutting Shadow Chancellor”. Speaking at a Cicero Consulting and Policy Exchange fringe event on Sunday, Osborne said it would not make any sense to propose tax cuts three years before the party […]

Senior management reshuffle at HBOS

HBOS has reshuffled its senior management, with mortgages director David Nicholson taking over as retail distribution director. A replacement is expected to be announced shortly. Nicholson replaces Rob Devey, who is moving to HBOS’s insurance and investment unit. A group of former Alexander Forbes directors has set up a professional indemnity brokerage for IFAs. Prime […]

The fastest marketing man in the west?

Pink Home Loans managing director Tony Jones (pictured below) has an alternative career in the entertainment industry if it does not work out for him in the mortgage market. He almost upstaged the excellent after-dinner speaker – Match of the Day 2 host Adrian Chiles – at his network’s service awards last week. Not one […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com