HC Deb 05 November 1998 vol 318 cc1007-9
10. Mr. Laurence Robertson (Tewkesbury)

What discussions he has had with representatives of independent financial advisers regarding the investigations into the selling of pensions during the 1980s. [56868]

The Economic Secretary to the Treasury (Ms Patricia Hewitt)

As the hon. Gentleman will recall from the debate earlier this week, I am well aware of the concerns of the Independent Financial Advisers Association about phase 2 of the pensions review. The hon. Gentleman and many other hon. Members have registered those concerns with me. I shall be meeting representatives of the IFA Association later this month.

Mr. Robertson

Is the Minister also aware of the Personal Investment Authority ombudsman's practice of charging IFAs £500 every time a complaint regarding pensions or other financial services products is made against them? Even if the complaint is not upheld—if it is found to be frivolous and thrown out—the company cannot claim back that £500. That is surely not natural justice.

Ms Hewitt

I am sure that the hon. Gentleman shares my belief that we need a high-quality IFA sector that customers can trust. An effective regulatory regime, including an ombudsman system to which consumers can take their complaints, is part of that sector. Of course it is right that the industry as a whole should cover the costs of that regime, because it stands to benefit from it.

Mr. Gerald Bermingham (St. Helens, South)

Might it not be helpful if the pensions industry examined its own codes of practice? A constituent recently complained to me that, before his endowment policy was due to be paid, independent financial advisers seemed to know that he was due for some money. Is that not yet another instance of pension companies selling on the names of people who are beneficiaries?

Ms Hewitt

I share my hon. Friend's concern about such a practice. Despite the welcome progress that has been made, particularly by the large firms, in putting right the scandal of personal pensions mis-selling, the financial services industry still has some way to go before we reach the standards that all of us have a right to expect.

Dr. Vincent Cable (Twickenham)

What steps is the Minister taking to ensure that the burden of the mis-selling scandal is borne by the shareholders of insurance and pension companies, rather than by other policyholders in those companies?

Ms Hewitt

As the hon. Gentleman knows, from the beginning of our action on the personal pensions mis-selling scandal, we have taken the view that the costs of putting matters right should be shared by all those who stood to benefit from it. Therefore, where with-profits policyholders have shared in the growth in their fund, the costs should be shared in the normal proportion—90:10. We are keeping a close eye on the allocation of the costs of the pensions review, and of course we shall intervene, if necessary, to protect policyholders' reasonable expectations.

Mr. Nick St. Aubyn (Guildford)

Given the Minister's statement earlier this week that compensation under phase 2 should be calculated on present market conditions, does she agree that, in order to take account of market conditions, the Financial Services Authority should raise the compensation cap, which has not been raised for 10 years, in cases where the IFA is not able to make the compensation?

Ms Hewitt

The hon. Gentleman raises an important point. As I stressed in the debate on Tuesday, we have put in place a system for calculating any loss that may arise from mis-selling at the time, on the basis that has been advised by senior actuaries, and that would be applied in the courts. I shall write to the hon. Gentleman in more detail on the specific point that he raises.