HC Deb 17 February 1994 vol 237 cc901-2W
Mr. Butterfill

To ask the Chancellor of the Exchequer what information the Securities and Investments Board requested from FIMBRA, LAUTRO and IMRO in relation to pension transfers; what was the basis of the brief given by the Securities and Investments Board to KPMG; what action was taken by the Securities and Investments Board in investigating pension transfers by the companies directly regulated by the Securities and Investments Board; what were the terms of reference of the steering committee on pension transfers; and if he will make a statement.

Mr. Nelson

[holding answer 16 February 1994]: KPMG was asked by the Securities and Investments Board to examine in conjunction with FIMBRA, LAUTRO and IMRO the extent of compliance with regulators' requirements in the sale of lump sum pension transfers. I understand that the study was carried out on a representative sample of client files provided by those SROs. It was commissioned as a result of SIB's analysis of compliance by directly regulated firms, which indicated significant levels of non-compliance. SIB published the report on 16 December 1993. It found that, as with SIB's directly regulated firms, a large proportion of files did not contain all the material that they should have contained. SIB has stressed that it remains to be seen how far this finding is symptomatic of unsuitable advice causing financial disadvantage to investors.

A regulators steering group, chaired by the chief executive of SIB, has been charged with examining the extent of the problem and devising preventative and remedial guidelines. An advisory committee of experts, chaired by Sir Douglas Wass, has been set up to advise the SIB board on further work on pension transfers. Full terms of reference of both are set out hereafter.

Pensions Advisory Committee

1. To review the plans and proposals developed by the Regulators' Steering Group in accordance with its terms of reference, with particular regard to their practicability and to the extent to which they address the problems identified; and

2. To submit to the SIB two reports on the outcome of its review: the first on the proposals of the Steering Group for the development of preventative measures; and the second on the full report of the Steering Group on the actions required to provide remedies for any shortcomings in the advice given to clients.

3. It is understood:

  1. (a) that members of the Advisory Board will be free to consult their "constituencies" on an informal and confidential basis during the course of its work, and
  2. (b) that the Advisory Board will be free to publish its reports to the SIB in the event that the body does not accept its advice in whole or in part.

Regulators' Steering Group

  1. (i) To advise on further measures necessary to ensure that future pension business involving transfers or opt outs from occupational pension schemes is conducted in accordance with applicable regulatory standards.
  2. (ii) To develop specifications for an industry review of potential problem cases, and the priorities for tackling the review.
  3. (iii) To clarify the scale and incidence of detriment to investors.
  4. ((iv) To consider what forms of remedy are appropriate in different sets of circumstances.
  5. (v) To plan for co-ordinated regulatory activity where it is necessary.
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  7. (vi) To foster commitment within the investment and occupational pensions industries and the actuarial profession to the review, and to the resolution of problem cases.

To keep SIB informed of its progress on the above by means of monthly reports, and in particular to report on (i) above by 28 February 1994 and to report on overall progress by 30 June 1994.