View from City Road: Life insurers must take the blame
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Your support makes all the difference.The life insurers' 'sell first, think later' philosophy is going to cost them dear once again. Accepting transfers from occupational pension schemes proved an easy sale during the recession, particularly with so many employees becoming early leavers because of redundancy.
Unfortunately, the Securities and Investment Board believes many people would have been better off leaving their money where it was. A pilot study suggests perhaps 150,000 of the 500,000 who have transferred their benefits, or opted out of their company pension scheme, have been badly advised. The cost of putting this right will run into hundreds of millions.
Let's assume pounds 500m and that the burden will be evenly spread across the life industry according to market share. This means Standard Life could be looking at a bill of pounds 55m, the much smaller NPI pounds 32m, and Legal & General pounds 31m. For mutual life offices, these are big sums to take away from their other policyholders.
The insurers say it is not all their fault. Company schemes should have provided better transfer values. They are not responsible for the advice given by independent advisers.
The insurers, though, are probably the only parties with any real money. If they failed to show the necessary caution and make the necessary checks before proceeding with such business, they have only themselves to blame.
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