Mis-Sold Personal Pensions: Compensation Uncertain for Hundreds of Thousands

More than 2 million employees who took out personal pensions in place of company schemes since 1988 may be left without adequate compensation, according to pension specialists. The Securities and Investments Board's order for insurance companies to review high-priority cases could total up to £2 billion, but it is feared that many outside this category will not be reviewed at all. Over 500,000 people who transferred out of company schemes fall outside the high-priority category, with some concerns that even those who do receive compensation may receive inadequate offers.

Key Takeaways:

• Over 2 million employees took out personal pensions in place of company schemes since 1988, with a majority expected to lose out due to inadequate compensation offers.
• More than 500,000 people who transferred out of company schemes fall outside the high-priority category for compensation review.
• Pension specialists fear that many compensation offers may be inadequate, with some individuals potentially receiving lower offers than their likely losses.
• Certain groups, including those who bought policies in 1988 and 1989, those who contracted out of the State Earnings Related Pension Scheme (Serps), and "execution-only" or "non-advice" cases, are expected to face difficulties in obtaining compensation.
• Solicitors are gearing up to advise and take legal action on behalf of pension plan holders, with some organizations offering free guides and advice.

Statistics:

• More than 2 million employees took out personal pensions since 1988.
• Over 500,000 people transferred out of company schemes.
• Up to £2 billion in compensation could be awarded under the Securities and Investments Board's review.
• 146 collapsed firms are being dealt with by the Investors Compensation Scheme.
• The ICS is potentially facing a compensation bill of at least £6 million for transfer cases associated with the defaulted firm, Pall Mall Asset Management.

Sources:

• "Byline: NEASA MACERLEAN PLANS" article in an unspecified publication, citing the Securities and Investments Board's order.
• The Law Society's "standing ready" to run a scheme identifying specialist solicitors for members of the public.
• Ringrose Wharton's offer of a free Pension Transfers Guide.
• The Personal Investment Authority Ombudsman's contact information.
• The Securities and Investments Board's free leaflet, "The Pension Transfer and Opt Out Review; What it will mean for you".