The Government has ann ounced that the FSA is to hold an inquiry into the downfall of Equitable Life just a week after Sir Howard Davies ruled out an “immediate inquiry”.
The announcement came in a Commons debate where opposition MPs claimed stakeholder pensions will fail in the wake of the Equitable debacle.
Treasury economic secretary Melanie Johnson told MPs that the FSA board would be meeting to discuss the matter this week.
Both opposition parties argue that stakeholder is in danger because of concerns over insurance company funding following Equitable's failure to adequately reserve.
Speaking in Parliament,LibDem DTI spokesman Vincent Cable referred to a memo from the DTI to the FSA written more than two years ago raising concerns about the financial stability of Equitable. The memo was written when the DTI handed over authority for the supervision of the insurance industry in November 1998.
Conservative Treasury spokesman Richard Ottaway called for a number of changes to be made to the Equitable board to enc ourage more openness and policyholders' interests to be better represented.
Ottaway said: “The minister's response was abysmal. What we need now is clarity. Any inquiry has got to be much wider than what the FSA is up to.”
Tory shadow economic secretary Howard Flight said: “There will be considerable problems promoting stakeholder pensions. The Government must have known the way this was going for at least the last three years.”
A Treasury spokesman says: “Stakeholder pensions will virtually be unit-linked rather than with-profits so there will be no problem with the issue of reserve funds.”
The PIA has issued standards for IFAs advising Equitable Life clients. It says advisers must make clear all the advantages and disadvantages of remaining with the life office. A reasons-why letter must also be supplied detailing the recommendation in light of the client's circumstances.