HM Treasury News Release
144/97 18 November 1997
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HELEN LIDDELL GETS TOUGH WITH PENSION COMPANIES
A package of sanctions aimed at maintaining the pressure on
pension firms to meet their targets for resolving pensions mis-
selling cases was outlined today by the Economic Secretary, Helen
Liddell in a statement to the House of Commons.
Mrs Liddell said the measures were to ensure that such a scandal
never happened again and that those who suffered can now look to
speedy redress. She said:
"Justice for them has been too long delayed. This
Government is determined to ensure it is delivered."
The Minister said that while some companies had made some
progress in resolving cases, there was still a long way to go.
Publishing the table of the progress of the top 41 companies, she
said:
"Far too many firms across the industry - from big
insurance companies to small independent financial advisers
(IFAs) - have been far too slow to act. Some firms have
hardly started. They have not yet grasped the severity of
the situation."
The Minister stressed that the most pressing challenge for most
of the companies was to complete 90 per cent of the highest
priority cases, due by the end of December. Looking further
ahead, she announced that once they had hit their second targets,
due at the end of 1998 at the latest, their names would be taken
off the list that is published every month.
Mrs Liddell drew attention to the recent use by the regulators
of their powers to fine and censure firms. Rigorous discipline
would continue, however for some firms a stronger armoury was
called for. Under a new regime of individual registration with
the Personal Investment Authority (PIA), due to come into force
next year, individual directors, managers or sales staff found
at fault could be liable to fines, reprimands or restrictions on
the type of work they can be involved in.
The Minister noted that the PIA can require firms to advertise
their misconduct and the grounds on which they are disciplined.
The Minister said:
"The Government believes that the time has come for a whole
range of sanctions to come into play.
"The only way for a firm or an individual to avoid
disciplinary action is to avoid the conduct which warrants
it."
Mrs Liddell said that she would continue to look for ways to
maximise pressure on the industry. The PIA is currently
exploring how to inform customers directly of firms'
misdemeanours.
She urged the industry to act quickly to restore confidence.
Evidence of firms putting investors at risk would be acted upon.
This might include:
use of the PIA power to put firms out of business where
compliance is so poor that investors are put at risk. This
could include firms or IFAs using the review process to
sell more products to customers; and
taking action to exclude senior people who are not fit and
proper from involvement in financial services business or
to remove them from their posts.
The Minister also said that firms' records on settling pension
cases could be taken into account in future policy decisions on
stakeholder pensions and individual savings accounts. She said:
"We anticipate that future decisions on the regulatory
approval of stakeholder pensions would take into account
the conduct and corporate governance of those involved.
This would include, of course, their record in settling
cases of mis-sold personal pensions."
NOTES TO EDITORS
1. Media copies of the Economic Secretary's statement to the
House of Commons are available from the Treasury Press Office on
0171 270 5185.
2. Non-media copies of the statement are available from the
Treasury Public Enquiry Unit on 0171 270 4558.
3. The monthly table detailing the progress of the 41 pensions
firms is attached.
4. If you have access to the Internet you can find this
information at http:\\www.hm-treasury.gov.uk. Other Treasury
material is also available at this address.
A B C D E F G H
Under 25% of cases resolved
Gan 10,200 267 1,330 227 1,103 437 4 9
DBS 545 13 56 47 9 5 1 12
Countrywide 1,889 247 72 41 11 3 0 15
Lincoln National 12,808 1,031 1,918 658 1,260 622 5 18
Windsor Life 8,279 1,331 651 73 578 369 4 21
25-50% of cases resolved
Canada Life 5,439 141 1,537 369 1,168 883 16 26
Burns Anderson 413 28 85 66 19 14 3 26
Financial Options 276 72 9 5 4 2 1 29
Sun Life of Canada 25,850 5,193 4,073 295 3,778 1,935 7 29
Friends Provident 6,521 787 1,321 320 1,001 776 12 29
London and Manchester 7,826 534 2,325 329 2,025 1,525 19 31
CIS 43,603 2,129 13,847 10,113 3,734 2,427 6 34
Brittanic 17,484 2,837 3,664 1,613 2,051 1,438 8 34
Royal & Sun Alliance 15,278 1,550 4,502 662 3,840 2,958 19 34
Godwins 1,358 38 523 266 257 176 13 35
Allied Dunbar 17,754 2,263 5,341 2,108 3,233 2,195 12 37
Hill Samuel 5,916 687 1,809 393 1,416 1,116 19 37
United Assurance 12,282 725 4,364 1,439 2,925 2,528 21 38
Abbey Life 16,801 3,566 3,480 793 2,687 2,122 13 39
Standard Life 6,523 367 2,310 926 1,384 1,225 19 39
Colonial 7,977 1,807 2,018 259 1,759 1,089 14 40
Prudential 70,800 11,577 28,777 2,420 26,357 14,292 20 40
Sedgwick 10,175 2,622 1,814 731 1,083 777 8 41
Albany Life 2,844 462 1,238 70 1,168 645 23 41
NatWest 13,849 3,277 3,564 777 2,787 1,895 14 43
Pearl 40,863 1,913 23,622 4,356 19,266 11,408 28 43
Guardian 8,697 736 3,909 710 3,199 2,433 28 45
Royal London 10,860 906 5,752 1,172 4,580 2,767 25 45
Lloyd's TSB 48,028 7,395 15,325 4,741 10,584 9,556 20 45
Midland 4,740 329 2,292 358 1,934 1,490 31 46
Commercial Union 7,374 943 3,079 678 2,401 1,809 25 47
IFA Network 229 44 73 59 9 4 2 47
Over 50% of cases resolved
Wesleyan 4,307 358 2,192 667 1,525 1,226 28 52
Norwich Union 7,081 2,052 2,079 543 1,536 1,196 17 54
Hogg Robinson 1,896 632 578 174 404 220 12 54
Berkeley Independent 72 40 2 2 1 1 1 60
Legal & General 35,094 13,254 10,126 1,292 8,834 6,611 19 60
AXA Equity and Law 3,846 659 2,289 641 1,648 1,167 30 64
M&E Network 269 149 43 14 29 19 7 68
Equitable Life 11,054 5,592 2,397 1,134 1,263 992 9 70
Barclays 16,739 5,812 7,097 1,816 5,281 4,293 26 71
A: cases identifed as requiring review
B: of A, cases where investor was informed that information gained during
assessment excluded cases from review
C: number of assessments completed
D: cases where the investor has been informed that no redress is due.
E: cases where redress has been offered
F: cases where redress has been accepted.
G: cases where redress has been accepted as a percentage of cases identified
for review ((F/A)x100).
H: cases completed, including exclusions, as a percentage of cases identified
for review (((B+D+F)/A)x100).
__________________________________________________________________
STATEMENT TO THE HOUSE OF COMMONS FROM ECONOMIC SECRETARY, HELEN
LIDDELL ON 18 NOVEMBER
With permission, Madam Speaker, I would like to make a
further statement on the mis-selling of personal pensions.
2. On 9 July, I reported to the House on the progress
being made by individual firms with most cases to put right
in what is possibly the most extensive scandal ever seen in
our financial services industry. Each month subsequently,
I have published the latest facts available to me. Today,
I have placed in the Library further information about the
progress being made.
3. We are now seeing positive results from the pressure
applied since this Government was elected. In May only 2
per cent of cases had been compensated. Now there has been
an 8-fold increase in the number of people receiving
compensation, proof that in the cold glare of publicity,
firms can raise their game and make progress. However, more
could and should be done.
4. Before I go into more detail, it might assist the House
if I recall the events which led to this scandal. The
Social Security Act of 1986, a much-vaunted piece of
legislation by the last Government, encouraged millions of
people to change sound pension arrangements for something
different in the belief that they would be more secure in
later life. Some will be. Not all however. For some, the
change meant a future less secure, not more so.
5. Between 1988 and 1994, life insurance companies,
independent financial advises, banks and building societies,
through vigorous marketing sold over 5 million personal
pensions. It soon became clar that this meant disaster for
many, including hundreds of thousands in nursing, teaching
and other professions, who had been persuaded against their
best interests to abandon the safety of their occupational
schemes.
6. The truth is that many firms did not abide by the
regulatory rules then in force requiring them to give
suitable advice. Among those firms failing their customers
were many household names.
7. The Securities and Investments Board in 1993 took the
unprecedented step of requiring firms to review the cases
of those most likely to have suffered. The scale of the
problem can now be seen: some 600,000 cases are currently
being reviewed and on current indications the cost of
compensation will be at least 2 billion Pounds.
8. Deadlines were set for completing the most urgent
reviews. These were well missed. The last Government stood
by and let this happen.
9. On 14 May this year I met heads of 24 firms responsible
for about three-quarters of the total of the cases; I left
them in no doubt about our determination to ensure those
wasted years would be redeemed.
10. Most of the big firms are making headway; indeed, some
of them have made large strides. But far too many
firms - from large insurance companies to small independent
advisers - have been far too slow to act. Some have hardly
started. They have failed to grasp the severity of the
situation.
11. The experience of the past few months shows that
pressure - from the Government, the regulators and the
public - is working. I intend to maintain it until the
review is completed.
12. In May the regulators set hard but realistic new
targets for all the firms concerned and made it clear that
there would be robust disciplinary action.
13. For most firms the first of these targets is to
complete 90 per cent of the most urgent cases by the end of
next month. Beyond that, they must complete all their
priority reviews by the end of next year - at the very
latest. When they reach that target, I will remove their
names from the list which I publish each month, although
they must continue to update me on their progress.
14. The recent reprimands and fines, against firms such as
the Prudential, Friends Provident and DBS, have attracted
wide publicity. This disciplinary rigour will continue.
But the Government and the regulators recognise that, in
respect of some companies at least, these sanctions may not
be enough; they are not galvanising the laggards. For them,
a stronger armoury of sanctions is required. The Personal
Investment Authority is working to achieve this through
individual registration and the new regime will come into
force as soon as possible next year.
15. Once this regime is in place, sanctions can be fine-
tuned to apply pressure directly on those responsible.
Individual directors, managers or salespeople found to be
at fault will face the prospect of fines, public reprimands
or restrictions upon the type of work in which they may be
involved. In extreme cases, they could be expelled from the
industry.
16. The public has a right to know about these failures.
At present, the PIA has the power to require firms to
advertise their misconduct and the grounds on which they
have been disciplined. Until now, this power has been kept
in reserve. There is now every reason to use it to the
full. The PIA is currently examining ways to ensure that
customers are informed directly of a firm`s failings.
17. Madam Speaker, the Government believes the time has
come for a tougher range of sanctions to come into place.
The only way for a firm or an individual to avoid
disciplinary action is to avoid the conduct which warrants
it.
18. While putting right the wrongs of pensions mis-selling
has been the priority, the Government hasn`t lost sight of
the fact that the financial services industry is central to
our economic prosperity and to the welfare of millions of
people. However its prosperity requires the confidence of
the public. That is why the industry must act quickly to
restore that confidence. If there is continuing evidence
that some firms won`t learn the lesson of the past few
years, and continue to harm investors, then we will act to
clean up the industry.
19. To this end, PIA has the authority to intervene on
behalf of the public and require that a firm ceases to
market or sell some or all of its investment products for
a period and puts its house in order.
20. Firms whose compliance with the regulators`
requirements is so poor that investors are put at risk can
effectively be put out of business. The PIA will use this
power wherever warranted. Candidates for this action will
include any independent financial adviser or any other firm
found to be using the review process as a foot in the door
to sell more products.
21. The regulators and the Government also have powers to
protect the public by taking action to exclude senior people
who are not fit and proper from involvement in financial
services business. Those who are not fit and proper can be
removed from their posts. We will see to it that they are
removed.
22. In the years ahead the Government plans a number of
major pieces of legislation which will have a profound
impact on the financial services environment. Lessons
learned from the pensions mis-selling episode will be in all
our minds as we go about that task - in relation to
stakeholder pensions, in relation to individual savings
accounts and indeed as we reform the regulatory regime
itself.
23. So far as pensions policy is concerned, we will not
repeat the mistakes of the last government. We will not set
people up for a fleecing. We anticipate that future
decisions on the regulatory approval of stakeholder pension
schemes would take into account the conduct and corporate
governance of those involved. This would include, of
course, their record in settling cases of mis-sold personal
pensions.
24. I hope that by the combination of measures which I have
outlined to the House today, we can ensure that never again
will the public be exposed to such a scandal as that which
I have described today, and that those who have suffered can
now look to speedy redress. Justice for them has been too
long delayed; this Government is determined to ensure it is
delivered.