Pensions Mis-selling (Hansard, 24 July 1997)

§ Lord Evans of Parkside
asked Her Majesty's Government:
What action they propose to deal with the mis-selling of private pensions to the public.

§ Lord McIntosh of Haringey
My Lords, the Government are determined to see the case reviews completed quickly, and redress made where it is due. On 9th July, the Economic Secretary to the Treasury published details of progress towards redress, or lack of it, by the top 24 firms. The Government will continue to publish information on progress and will not hesitate to see that further action is taken, as necessary, to speed up reviews.

§ Lord Evans of Parkside
My Lords, I thank my noble friend for that reply. Does he agree with me that the risible progress of the 24 pension companies named by Treasury Minister, Helen Liddell, in compensating the victims of mis-selling of pensions is a disgrace that has besmirched the good name of the City of London? Can my noble friend confirm that some 20,000 victims of the scandal have died uncompensated since the companies began their review of the fiasco some three years ago, and that unless the Government take harsh and swift action within the next two or three months many thousands more will die uncompensated before their cases are reached?
Finally, does my noble friend agree that the Tory Government Ministers who launched this privatisation of pensions some years ago bear as much responsibility for the scandal as the pension companies?

§ Lord McIntosh of Haringey
My Lords, on my noble friend's first question, the aim of the Personal Investment Authority is to see that 90 per cent. of claims are dealt with by the end of this year, and 100 per cent. by the end of next year. I am not at all convinced that it will be achieved and, even if it were, I do not think it is good enough, for the reasons that my noble friend gives.
On the second question, about the responsibility of the previous Government, I have only too good reason to agree with him since I ran a company pension scheme myself for 30 years. The previous Government weakened company pension schemes by allowing individuals to opt out; weakened SERPS by reducing the returns; and encouraged people to opt out by what might be termed the DSS short-term bribe. The result was that hundreds of thousands of people opted out, many of them losing out because of mis-selling and the lack of adequate company contributions.

§ Lord Marsh
My Lords, will the Minister accept that no one can support the mis-selling of pensions where 1511 that existed and that resolution of the matter is long overdue—it should have been cleared up to a much greater extent and faster than it has been so far? However, will he further accept that the removal of tax credits has resulted inexorably in a large number of pensions, sold and purchased in good faith, now being clearly inappropriate for those to whom they were sold, purely and solely as a result of the Government's action?

§ Lord McIntosh of Haringey
No, my Lords, I do not agree at all. On the contrary, the Association of British Insurers has recognised that, in the longer term, the switch to greater capital appreciation and the reduction of lower dividend streams will actually be of benefit to pension funds. In the shorter term, I hope that insurance companies and pensions sellers will not use ACT as an excuse for delaying compensation.

§ Lord Clark of Kempston
My Lords, while I accept the fact that some pensions have been jeopardised as a result of mis-selling, does the Minister agree that the change in the fiscal treatment of dividends in pension funds is bound to mean that those pensioners will be jeopardised as well? Will he further agree that it is quite illogical for the Government on the one hand to try to encourage people to save for their old age and, on the other, to penalise that fund when it is set up?

§ Lord McIntosh of Haringey
My Lords, the first part of the noble Lord's question was the same as that asked by the noble Lord, Lord Marsh. I notice that the noble Lord now acknowledges that "some" pensioners were victims of mis-selling. That is a gross under-statement.

§ Baroness Turner of Camden
My Lords, does the Minister agree that, for the lower-paid, personal pensions were always unlikely to be a very good vehicle for retirement? Would it not be a good idea if some of these considerations were pointed out to people? Could not the financial services industry be given deadlines by which this whole fiasco should be cleared up?

§ Lord McIntosh of Haringey
My Lords, my noble friend is quite right to look to the future of pensions and not merely at the past. As she will know, the President of the Board of Trade announced only yesterday that there would be a new, arm's length financial services regulatory body which will be under the ministerial control of the Treasury rather than the Department of Trade and Industry. I hope she will feel that that, combined with the review announced by the Department of Social Security, shows our firm intention to see to it that in future the best kind of pension scheme is available to all, including the low-paid.

§ Lord Mackay of Ardbrecknish
My Lords, will the Minister accept that I agree with him that there was no excuse for pensions mis-selling, and there is no excuse for not putting the matter right—just as there was no excuse for the ex-Labour MP, Robert Maxwell, 1512 pillaging his members' pension funds? Nor is there any excuse, as the noble Lord, Lord Marsh, said, for Chancellor Brown taking £5.4 billion from pension funds in the future. If the Minister doubts that, will he read the comments of the National Association of Pension Funds?
On a more positive note, will the Minister agree with me that, for very many people whose employers do not provide pension funds, personal pensions are a perfectly appropriate and correct vehicle to provide income for their retirement?

§ Lord McIntosh of Haringey
My Lords, I shall reply to the noble Lord's positive points rather than to his diversionary tactics. Yes, of course it is true that there are many people, particularly the self-employed and those who are likely to change jobs frequently, for whom personal pension schemes are more appropriate than the kind of final salary scheme which denies individuals transferability from one employer to another. However, it is also important that, where possible, there should be employer contributions, as well as a minimising of the administrative costs which are too common a feature of personal pension schemes.

§ Lord Harris of Greenwich
My Lords, as the Minister may be aware, most of us welcome the action taken by the Economic Secretary to the Treasury in dealing with this very unfortunate matter. Is he also aware that, whatever we may think of the Chancellor's Budget so far as pension provision is concerned, the central question for the House is the mis-selling of pensions by disreputable salesmen working for some of those 24 companies? That is the central issue. I am sure that all of us would welcome vigorous action by the Government to deal with it.

§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Lord for returning to the original Question on the Order Paper. He is quite right. I suspect that he is also asking when criminal proceedings will be taken regarding some of the grosser examples of mis-selling. I can only say to him that, regrettably, it will not be possible to consider that until the redress procedure is complete or almost complete.