§ Mr. John GreenwayTo ask the Chancellor of the Exchequer what progress has been made in the reviews of personal pensions cases referred to in the guidelines issued by the Securities and Investments Board in 1994. [4278]
§ Mrs. Angela KnightSIB' s guidance to regulators recognised under the Financial Services Act 1986 called for a substantial programme of case reviews to establish whether people who had transferred out of occupational schemes, or opted out of them, or had never joined them, in order to hold a personal pension had done so as a result of mis-selling. Where mis-selling was found to lead to financial loss for investors, SIB has looked to the investment firms responsible to provide redress either by reinstating the investor into the occupational scheme—where this was possible—or by topping up the investor's personal pension.
This review process has proved extraordinarily difficult for all concerned. It has required regulators and investment firms to devote substantial resources to the casework. There have been a number of reasons why progress has been slower than the regulators had expected, some of them arising from factors beyond the control of the firms responsible for carrying out case reviews. However, regrettably there are some investment firms which have made less effort than others to carry out the required casework.
Even when the firms concerned are anxious to bring cases to a speedy conclusion, it has often proved difficult to do so because of the volume and complexity of the information required to evaluate each case in full. For whatever reason they arise, delays are a matter of concern.
In order to speed up progress with reviews, SIB has today issued a statement setting out a streamlined approach to evaluation of scheme benefits for computation of loss or redress. It involves using a simplified model which is designed both to reduce significantly the burden on occupational schemes and to enable firms to reach reliable conclusions by using information which is generally available about the terms of the relevant occupational scheme(s) together with standard or approximate data for missing items. By using this approach, it should be possible for investment firms to conclude case reviews more quickly and thus put matters right for investors more quickly too. Where 225W standard or approximate data are used for important items, investors will be informed and have the opportunity to provide detailed data.
The Government welcome this initiative. SIB's model should provide robust results with less administrative input. It means investors who might otherwise have been members of occupational schemes should get their cases sorted out more quickly while investment firms should need to divert resources into this important task for a shorter period. It will also require less input from occupational schemes, which can experience difficulties in providing non-pension information about former members.
The pensions industry must make haste to complete their case reviews, in the interests not only of the financial position of the investors concerned but of restoring the industry's reputation. I also trust that occupational schemes will co-operate in providing information to investment firms and in providing reinstatement for current employees.
For the public service pension schemes, the basic information required is already fully available. Steps have also been taken to ensure that these schemes stand ready to reinstate current employees into the relevant schemes for both future and past service.
At this state, it is not clear how fast cases can now be progressed. Investment firms have much relevant information already and may be able to complete these cases quickly now. SIB now expects the front-line regulators to assess what can be achieved by their members using the new guidance, and then to set and monitor realistic but appropriately challenging targets for completing the review process.
Investment firms have a clear responsibility to give priority to this important task. Their good names and the prospects of the industry depend upon it. I therefore welcome SIB's warning that firms failing to carry out their responsibilities must expect disciplinary action from their regulators. I very much hope that further disciplinary action will not be necessary and that the pensions industry will now move swiftly to put this unfortunate episode behind it.