Many people who received compensation from the pension review provided misleading information to the regulator and should never have received a payout, according to an ex-PIA director and leader of the review.
Speaking at a Social Market Foundation/Provident Financial event at the Labour conference in Bournemouth this week, Lord David Lipsey said in his experience, some of those compensated “knew it was in their interest to forget what had happened to them”. He said this problem increased over time as more people got payouts and advised others on the correct thing to say to ensure they were compensated despite not having a valid case.
The Labour peer told delegates: “My own experience of dealing with the pension review, and this is also true with endowments, is that we were successful in getting people to come to us but they were not always truthful.
“A lot of them had been sold pensions perfectly validly and they had either forgotten what had happened, or they remembered, but knew it was in their interests to forget what had happened to them.
“So a large number of people have been compensated, some of them rightly, some of them wrongly, and I think there was an erosion there of a duty of moral hazard on the part of the purchaser.”
Lipsey was a PIA director and member of the regulator’s five-strong pension review committee which monitored the review and advised the FSA on the issue when it formed. Advisers paid out millions of pounds as a result of the review.
Lipsey, who is chairman of the SMF, used his pension review experience to warn Labour delegates about the potential dangers of generic advice.
He said if generic advice resulted in people moving to particular behaviour patterns and things went wrong, there was the “very strong” possibility that the public would blame the Government, resulting in a “huge and plausible call for compensation”.