A survey by accountant KPMG Peat Marwick looked at 735 pension transfers by Fimbra, Imro and Lautro members and concluded that only nine per cent of fact finds were compliant. The scale of the transfer bill was set at £20m by Fimbra chief executive Jillings in February. Other estimates were as high as £2bn.
By May the PIA suggested life offices could contribute to the liabilities of IFAs in the same way that they capped IFAs’ liabilities under the Investors’ Compensation Scheme. But the ABI warned any moves in this direction would be opposed.
In the autumn, SIB called for IFAs and life offices to reopen 350,000 transfer and opt-out cases in its paper on compensation procedures. SIB chairman Andrew Large said IFAs were responsible for a third of the 1.4 million transfer and opt-out cases it identified since the introduction of personal pensions in 1988.
The SIB report drew up a timetable for reviewing compensation cases, according to the position of the investor and the likelihood of loss. It also signaled that the PIA may have to raise the £100m annual cap on the ICS after April 1995 to account for pension transfer compensation, with an increase in the IFAs’ share of the liability. IFAs were warned not to admit liability to avoid losing PI cover. Consequently, the ABI reported a 22 per cent drop in pension sales in the third-quarter of 1994.
Meanwhile, Standard Life deputy managing director Jim Stretton resigned from the PIA board and called for a single tier regulator answerable directly to Parliament in January.
PIA chairman Joe Palmer said its prospectus would be out in February, with the PIA taking over retail regulation in six months. But its April 5 deadline for applications was criticised as impractical and Jillings was ousted as deputy chief executive.
Nfifa advised it members to hold off applying to the PIA and Prudential said it was seeking direct SIB authorisation. By April 5, the PIA had only received 2,000 applications. Tory MPs and IFA trade associations called on Chancellor Kenneth Clarke to make the PIA a designated agency with powers equal to those of SIB. Disquiet was also expressed at the position of PIA chairman Joe Palmer following the Lautro fine of £180,000 on L&G for a compliance breakdown while he was its chief executive.
In July, the report from the Treasury and Civil Service select committee slammed the PIA but stopped short of recommending it to be abolished, but it did called for Palmer to resign.
The PIA finally reached its full term on July 18, when it became operational. By September 3,509 firms from an initial Fimbra membership of almost 6,000 had applied to join the PIA More than 1,000 firms missed the October 1 deadline, with 12 firms derecognised. Six of the deauthorised firms were reinstat¬ed amid claims of a bureaucratic mix-up. It was estimated 200 firms had left the industry, with 300 joining the IBRC and more then 300 joining IFA networks. Another 61 Fimbra firms said they intended to apply to another regulator.
In March NU axed its direct sales staff of 300 and suspend¬ed the rest of its sales staff for a month after a breakdown in competence standards. And the press’s new chief bogeyman was Knight Williams, after a World In Action TV programme exposed its rep’s selling practices. This followed a £50,000 fine by Fimbra in September for misleading advertising.