THOUSANDS of teachers involved in a new pensions mis-selling scandal could be entitled to compensation of up to pound;5,000 each.

They are among tens of thousands of public-sector workers who have been persuaded to top up their pensions through free-standing additional voluntary contributions (FSAVCs).

Some of the country’s best known financial services companies such as Legal and General persuaded teachers to take out free-standing schemes rather than invest in in-house additional voluntary contributions (AVCs).

But council pension administrators have discovered that some staff, who signed up for the worst two schemes, were due to receive about 60 per cent less than if they had invested in an in-house scheme.

Nine teachers in Gwent have already received payouts averaging pound;3,000 each. The county’s pensions fund administrator, Paul Skillicorn, predicts that thousands more will be entitled to compensation.

Kevin McAnulty, a primary head, has just received pound;3,000 in compensation from Legal and General, which advised him to buy its FSAVCs 10 years ago.

Mr McAnulty, of Abercarn school in Newport, said: “There was no mention of the teachers’ AVC scheme, and I had no idea I had done anything wrong until I received an email from Paul Skillicorn just before Christmas warning me to check my arrangements.

“If I had been aware that an in-house scheme existed, I would have chosen that, instead of a private scheme with huge charges.”

Other companies involved in selling FSAVCs to public-sector workers in Gwent include Lloyds TSB, Pearl, Royal London, and Co-operative Insurance Society.

Teachers’ unions are furious that a review of pensions mis-selling by the Financial Services Authority, a government watchdog, does not include public-sector workers.

The FSA said it would not be “cost-effective” to include them because it costs pound;750 to review each mis-selling case. It said the onus was on the individual to request a review from the company that sold the policy.

But this argument is rejected by both the unions and council pensions administrators.

Marion Bird, deputy head of pensions at the Association of Teachers and Lecturers, said: “It is difficult to understand why the authority did not include public-sector workers in the review when, quite clearly, they should never have been advised to take out a free-standing AVC as a good in-house scheme was available. It smacks of a cover-up.”

Mr Skillicorn said: “The last thing the FSA wants is another pensions scandal, so it has given the issue a low profile, hoping it will go away.”

However, the authority insisted there is nothing to stop teachers and other public-sector workers seeking compensation.

A spokesman said: “Even if you are not entitled to an automatic review, you can still ask for one. There has been extensive publicity about mis-selling and most schools and local authorities have advertised it.”

Grim downside of pension top-ups, 31