Money: Steps to make inquiry easier

Clifford German on pensions

The Securities and Investment Board this week got round to chasing up the insurance companies and independent financial advisers which have been dealing with half a million "urgent" cases of mis-sold pensions with all the enthusiasm and speed of a Swiss bank disgorging war-time German gold. Insurance companies which, in the late Eighties, sold personal pensions to people who would probably have been better off in company schemes have assessed only 5 per cent of the 446,000 priority cases and offered redress to less than 2 per cent. Independent financial advisers have less of a workload, about 60,000, but have dealt with a minuscule proportion.

In an attempt to break the log-jam, SIB intends to tear up the list of 200 separate questions which insurers and advisers have been using to establish the extent to which the alleged victims have lost money, and replace it with eight simple questions.

Only when the questions have been answered will it be possible to assess whether there is a case for compensation and, if so, what form it should take and how much it should be.

There are two possible options. The insurance companies or financial advisers can negotiate to buy their clients back into their original schemes, which will usually be the best option where the individual continues to work for the same employer.

But in many cases the trustees of the original schemes will set a high price for re-entry, and providers are obliged to comply with the original terms of the scheme, where these are known, or with any subsequent improvements. This alone will involve a great deal of extra paperwork and create another bottleneck a little further down the road.

If reinstatement is not possible, the investments in the personal pension should be topped up, although it will be impossible to guarantee that a personal pension scheme will pay out the precise amount that a company scheme based on service and final salary at work would pay. SIB estimates that there could be at least a 5 per cent error either way.

All this implies that providers still have a long hard road to hoe to reach a reasonable settlement, and they have less excuse now for dawdling. But holders of personal pensions who think they were wrongly advised to give up their company schemes or not to join them have to play their part as well. In some cases less than 30 per cent of them have responded to requests from the insurers or advisers to register a "complaint" so that it can be vetted.

There is no deadline or cut-off point looming but there is no way they can qualify for compensation even if it can be established they were given a bad deal and would have been demonstrably better off to have stayed in or joined a company scheme.

The moral of the story is that if you were sold a personal pension and persuaded to leave a company scheme, you should even now write to the company or adviser who sold you the pension. And if, as is probably the case, you have received a letter from the provider asking you to say whether you feel you were wrongly advised or simply not advised, find the form now and fill it in. If you have the documents from your original pension scheme it will help speed the process.