Is your union selling you short?

29th January 1999 at 00:00
Financial services make a lot of money for teaching unions, but members may not be profiting, Susannah Kirkman reports

TEACHING unions make a small fortune promoting insurance and other financial products - but they could be selling short their members, according to the Trades Union Congress.

Individual unions can earn up to pound;500,000 a year in commission by promoting services such as household and motor insurance.

But in the wake of the pensions' mis-selling fiasco, the TUC is urging them to scrutinise the track records of firms more carefully before endorsing their services.

The Consumers' Association has also advised teachers to check the insurance schemes offered through the unions.

"People take tie-ups with particular companies as an endorsement, but our advice would always be to shop around," said Philip Telford, of the CA.

Teachers were among the biggest losers in the late Eighties and early Nineties when they were persuaded to switch their savings away from occupational pensions to personal pension plans.

Yet Government figures show that two insurance companies recommended by unions are among the 10 firms responsible for the largest number of pensions mis-sold to teachers.

Colonial, which is linked to the National Association of Schoolmasters Union of Women Teachers, and Teachers' Assurance, set up by the National Union of Teachers, were both heavily involved in the mis-selling scandal.

Both companies pay commission to the unions for the business they receive from teachers. Altogether, the NASUWT receives around pound;500,000 a year from the group of insurance companies which it promotes to members.

The NUT has refused to disclose what it receives in commission, but insists that most of the money is ploughed back into services for members.

Prudential, which runs the teachers' in-house additional voluntary contributions (AVC) scheme, is also high up the mis-selling list. And Waring Marshall, an independent financial services adviser recommended to forces' teachers by the Ministry of Defence, had so many mis-selling cases to deal with that it was forced out of business.

The message seems to be that anyone endorsing insurance companies or particular firms of independent financial advisers must keep a wary eye on their activities.

A TUC spokeswoman said: "We recognise that unions will continue to develop links with insurance companies, particularly with the introduction of stakeholder pensions, but they should look long and hard at the record of companies before they form any new relationships."

Well-trained staff - paid salaries rather than commission - are a key safeguard, according to the Association of Teachers and Lecturers. When it first recommended Commercial Union to its members, the union insisted that only trained sales representatives were allowed access to teachers. The CU salesforce were trained by the ATL's pension department and had to pass an exam on the Teachers' Superannuation Scheme before they were allowed to deal with ATL members.

As a result, cases of mis-selling to ATL members by the CU have not even reached double figures.

In their defence, the unions argue that links with insurance companies are essential to provide members with the financial advice they need, particularly on retirement investments. Under the Financial Services' Act, unions are not allowed to give such advice.

The NASUWT argues that although Colonial was high on the original list of mis-sellers, it has reinstated teachers into their superannuation scheme more quickly than any other company. Colonial has also switched to a salaried workforce.

Have you been mis-sold a pension? Contact the TES Newsdesk on 0171 782 3277.

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