Lilley to face questions on pensions
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Your support makes all the difference.PETER LILLEY, the Security of State for Social Security, is to be called before a committee of MPs next month to face questions about the large number of low earners who have been wrongly persuaded to leave the state earnings-related pensions scheme.
As the Independent reported yesterday, some experts fear that up to 2.4 million people earning less than pounds 10,000 could receive smaller pensions because they have taken out a private pension plan with a life insurance company. Most of the personal pensions sold since 1988 are funded only by the rebate of National Insurance contributions that the Government pays for 'contracting out' of Serps. For low earners, this will be insufficient to cover the charges levied by the life insurers.
Mr Lilley has been asked to give evidence to the Social Security Select Committee, chaired by Labour's Frank Field. The committee is concerned by widespread evidence of wrongful selling of personal pensions. Doubts also surround the business life insurers received by accepting transfers of benefits from occupational pension schemes. John Denham, the Labour MP for Southampton Itchen, yesterday called for an emergency debate on the personal pensions problem. He tabled a motion censuring the Government for its failure to help those wrongly advised.
Mr Denham wants the Government to compensate pension losers and to undertake an inquiry of the life insurance industry. 'It is becoming clear there are major problems within the pensions industry . . . The Government's enthusiasm for personal pensions has led to a situation where the interest of the consumer has taken second place to the interests of those selling personal pensions.'
In the late 1980s, Prudential, Britain's largest life insurer which has the largest share of the personal pensions market, calculated that up to 4.3 million people could benefit by taking out a personal pension. Yet sales have reached about 6 million, far in excess of the Government's original estimates. The cost of paying contracting-out rebates was recently estimated to have reached pounds 10.5bn.
The Securities and Investments Board, the senior financial regulator, yesterday published measures intended to prevent a repetition of the pension transfers scandal. It acknowledged that the tougher rules would force some firms out of pension transfer business.
In future, financial advisers recommending someone to transfer their pension benefits out of an occupational scheme to which he or she previously belonged will have to justify the decision with an explicit 'reason why' letter. It will also become compulsory to use a computerised analysis system to assess the transfer value on offer from the pension scheme. The SIB wants greater consistency in the assumptions used.
Leading article, page 19
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