After battling for years to gain compensation for members who were mis-sold personal pensions, teaching unions are reacting cautiously to the new Government's proposals to get tough with the pensions and financial services market. Labour plans to abolish the fragmented self-regulatory network and create a powerful single authority with stronger sanctions to protect investors.
"Will the new body be able to cope with the volume of complaints and investigations?'' asks Brian Clegg, assistant secretary for salaries and pensions at the National Association of Schoolmasters Union of Women Teachers. Thousands of teachers who were mis-sold personal pensions are still awaiting compensation, four years after the scandal broke.
Labour wants to reduce bureaucracy and cut costs by replacing with a single authority three separate organisations: the Personal Investment Authority (PIA), the Securities and Futures Authority (SFA), and the Investment Management Regulatory Organisation (Imro). A revamped Securities and Investment Board (SIB) would have more power to protect investors; under a strengthened Financial Services Act, it would be able to set individual deadlines for companies to complete reviews of compensation cases.
The National Union of Teachers, which still has around 1,000 members awaiting compensation, welcomes the plans. "A tougher attitude to mis-selling and the determination to follow it up would be effective," says Barry Fawcett, the NUT's assistant secretary for salaries and pensions.
But Brian Clegg says the new regulatory body will be impotent unless it is independent. "If it is full of people with connections to the insurance industry, like the current SIB, it will never bare its teeth to its own people," he says.
An impartial pensions regulator is vital, particularly for teachers, he believes. "As the teachers' pensions scheme has no trustees, we have no oversight and we are heavily reliant on the Personal Investment Authority to guard against abuse," Mr Clegg says.
Another safeguard would be to make membership of the regulatory body compulsory for all finance companies, he suggests. One of the largest, Prudential, does not belong to the PIA at present.
The Association of Teachers and Lecturers sees advantages to having several regulatory bodies. "They keep each other on their toes, and a single organisation could mean massive bureaucracy," says Marion Bird, deputy head of pensions at the ATL.
Meanwhile, insurance companies continue to drag their heels over compensation claims. Teachers' Pensions has provided information to insurance companies on 3,350 cases under investigation, but so far only 320 teachers have been reinstated in the Teachers' Superannuation Scheme.
The NASUWT says it will consider taking some of the larger companies to court unless they take swifter action. The union has already initiated proceedings against several firms of independent financial advisers over the delay in settling claims.
According to a spokesman for the Department for Education and Employment, one reason for the hold-up could be that some of the larger companies, including Legal and General, have applied to the PIA for alternative guidance on compensation.
At present, pension providers must restore to their occupational scheme anyone who was mis-sold a personal pension. If reinstatement is impossible, companies can top up the personal pension instead. In future, the companies would like to offer all victims the option of topping up their personal pension at retirement rather than being reinstated in the TSS. This would spread the cost to companies over a longer period.
The main advantage for teachers could be that they would receive an immediate offer of compensation, instead of waiting for the results of a review. However, the unions are still adamant that reinstatement is the best option.
Marion Bird points out that the companies are actually losing money by delaying compensation, as the costs of restoring a teacher to the TSS are based on their salary when reinstatement is made. While awaiting redress, one ATL member has been promoted from a B allowance to a deputy headship at a large school.
'It's a minefield'
Three years after submitting a claim for compensation, Sandy Perris, who teaches at Bognor Regis Community College, West Sussex, has finally been reinstated in the Teachers' Superannuation Scheme, although her colleague, Freda Heywood, is still waiting.
Mrs Perris, 46, had almost written the money off. "It started to get a bit frightening," she says. "I began to realise exactly what I had lost. It was really brought home to me when a 49-year-old friend had a second heart attack, and I realised that, if it had happened to me, my personal pension wouldn't have offered the same early retirement benefits as the TSS."
Sandy Perris and Freda Heywood were both persuaded to leave the teachers' scheme by a salesman from Guardian Royal Exchange, who visited them at school. "He told us it was the best thing we could possibly do. The benefits would be far higher than the TSS could offer," says Mrs Perris. "When someone tells you that, you tend to be swayed."
Although they have received support from their union, the Association of Teachers and Lecturers, both women have found the experience stressful. "The forms and questionnaires are full of jargon. It's difficult to understand exactly what you're signing," says Mrs Heywood. "I still feel in the dark, and I don't know how much money I will get back."
She believes that teachers are poorly informed about pensions. "It's a minefield. Whatever you do, someone's always telling you you're wrong."