Outlook: Pensions

ON TOP of the big daddy pensions mis-selling scandal, a lesser, baby outbreak of mis-selling in the insurance industry has come to light - that of free standing additional voluntary contributions (FSAVCs), which, unbelievably, continued at many life offices even after the daddy scandal was unmasked.

FSAVCs allow you to top up your pension with additional monies when you can afford it. The life assurance marketing men were selling them like topsy in the early to mid 1990s, often on terms which were not as good as could have been obtained through ordinary company pension schemes.

The industry has agreed that a small proportion of these people should be compensated - those where Inland Revenue rules were broken or where there could have been a matching contribution from the employer had the company pension scheme been used in preference to an outside provider. By the time the Financial Services Authority has finished investigating, it seems certain compensation will be paid to a great deal more.

Compensation is one thing, but what about prevention? So far the response has been to pile on the regulation and hope the industry has learned its lesson. Prudential, one of the worst offenders in mis-selling, is trying to change its culture by switching away from commission.

Sales people are becoming farmers rather than hunters, in that they are rewarded for growing business rather than getting it. This is plainly a step in the right direction and is more likely to yield results than any amount of regulation.

However, the complexity of the savings market - its lack of transparency, its interaction with the tax system and investment alternatives - remains the biggest barrier to a fair deal for consumers. Simplifying the market, rather than regulating it, should be the priority.