Ignorance is costly

24th May 1996 at 01:00
Many victims of the personal pension scandal have yet to admit that they made a mistake, says Richard Margrave. For many victims, the personal pension mis-selling scandal has become one long wait for redress. So frustrating is the delay that the Personal Investment Authority (PIA) is now threatening severe disciplinary action against those insurance companies that continue to drag their feet in examining cases and fixing compensation.

The mis-selling of personal pension plans had its origins in the boom of the late 1980s which followed the Government's so-called revolution in personal pension provision. As rumours mounted about the scale of a possible personal pensions "scandal", it was the Association of Teachers and Lecturers (ATL) which made the first big breakthrough. In the autumn of 1993, the union successfully negotiated for a member badly advised and secured full compensation for lost benefits. In December 1993, Dudley teacher Jennifer Brown's pension was restored to the position she would have been in had she remained in the Teachers' Superannuation Scheme (TSS) by payment of Pounds 20,933 by Abbey Life.

Official confirmation of the scale of the problem was to follow when the Securities and Investments Board (SIB), the City's chief regulator, found widespread evidence of mis-selling and instructed insurance companies to compensate those badly advised.

Although many insurance companies have used the official timetable for full investigation to delay settlement of cases, ATL has kept hammering away for a resolution for its badly advised members. The compensation received for ATL's members has now reached Pounds 394,513, or on average Pounds 20,231 per teacher.

The individual compensation sums range from Pounds 2,350 to as much as Pounds 102,290. On average each case has taken a labour-intensive 10 months to bring from first investigation to full settlement. The 223 cases that remain on the ATL's books alone could cost the pensions industry as much as Pounds 4 million.

The delay in settling these cases is a cause of real stress for some people. A number of those mis-sold personal pensions are chronically sick and need to take ill-health retirement. Calculations of the amount of enhanced pension a teacher applying for ill-health retirement will receive depend crucially upon the benefits already accrued in the occupational scheme. If a teacher was badly advised to opt out of the TSS to set up a private pension, then he or she will not be able to claim any enhanced pension. ATL is working on several such cases with some success.

Perhaps the most worrying aspect of the whole sorry saga is how many victims of the mis-selling remain in total ignorance despite the massive publicity. Altogether 28,000 teachers were persuaded to opt out of the TSS and the insurance companies and independent financial advisers are now required to contact all of them to check their advice.

The big insurers report that as many as one-third of those written to have failed to respond to repeated requests for information. Indeed one company, Swiss Life, has now resorted to offering a Pounds 5 Boots voucher to customers who reply. Many teachers, however, remain ignorant of the bad advice they received or refuse point-blank to admit that they could have been mis-sold a personal pension. Without exception, the victims feel ashamed that they could ever have fallen for the salespeople's advice.

ATL's advice is to swallow any pride, and make sure that you respond to these letters. If you have not yet received such a questionnaire, you should write to the company concerned asking it to investigate your case. To check whether you could be a victim of mis-selling ask yourself these questions:

* Have I got a personal pension plan?

* Did I opt out of the TSS, or as a part-time teacher fail to join?

* Did I transfer benefits which had accrued in the TSS into a personal pension plan?

If the answer to any two of these questions is "yes" then write immediately to your insurance company, or in the case of ATL members to the pensions team for an advice pack. ATL will continue to fight for compensation for those members wrongly advised and to laud the benefits of joining and staying in the teachers' occupational scheme.

Richard Margrave directs press, public relations and campaigns for the Association of Teachers and Lecturers

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