HELEN LIDDELL GETS TOUGH WITH PENSION COMPANIES

A package of sanctions aimed at maintaining the pressure on pension firms to meet their targets for resolving pensions mis-selling cases was outlined today by the Economic Secretary, Helen Liddell in a statement to the House of Commons.

Mrs Liddell said the measures were to ensure that such a scandal never happened again and that those who suffered can now look to speedy redress. She said:

"Justice for them has been too long delayed. This Government is determined to ensure it is delivered."

The Minister said that while some companies had made some progress in resolving cases, there was still a long way to go. Publishing the table of the progress of the top 41 companies, she said:

"Far too many firms across the industry - from big insurance companies to small independent financial advisers (IFAs) - have been far too slow to act. Some firms have hardly started. They have not yet grasped the severity of the situation."

The Minister stressed that the most pressing challenge for most of the companies was to complete 90 per cent of the highest priority cases, due by the end of December. Looking further ahead, she announced that once they had hit their second targets, due at the end of 1998 at the latest, their names would be taken off the list that is published every month.

Mrs Liddell drew attention to the recent use by the regulators of their powers to fine and censure firms. Rigorous discipline would continue, however for some firms a stronger armoury was called for. Under a new regime of individual registration with the Personal Investment Authority (PIA), due to come into force next year, individual directors, managers or sales staff found at fault could be liable to fines, reprimands or restrictions on the type of work they can be involved in.

The Minister noted that the PIA can require firms to advertise their misconduct and the grounds on which they are disciplined.

The Minister said:

"The Government believes that the time has come for a whole range of sanctions to come into play.

"The only way for a firm or an individual to avoid disciplinary action is to avoid the conduct which warrants it."

Mrs Liddell said that she would continue to look for ways to maximise pressure on the industry. The PIA is currently exploring how to inform customers directly of firms' misdemeanours.

She urged the industry to act quickly to restore confidence. Evidence of firms putting investors at risk would be acted upon. This might include:

use of the PIA power to put firms out of business where compliance is so poor that investors are put at risk. This could include firms or IFAs using the review process to sell more products to customers; and
taking action to exclude senior people who are not fit and proper from involvement in financial services business or to remove them from their posts.

The Minister also said that firms' records on settling pension cases could be taken into account in future policy decisions on stakeholder pensions and individual savings accounts. She said:

"We anticipate that future decisions on the regulatory approval of stakeholder pensions would take into account the conduct and corporate governance of those involved. This would include, of course, their record in settling cases of mis-sold personal pensions."

NOTES TO EDITORS

1. Media copies of the Economic Secretary's statement to the House of Commons are available from the Treasury Press Office on 0171 270 5185.

2. Non-media copies of the statement are available from the Treasury Public Enquiry Unit on 0171 270 4558.

3. The monthly table detailing the progress of the 41 pensions firms is attached.

	A	B	C	D	E	F	G	H
Under 25% of cases resolved
Gan	10,200	267	1,330	227	1,103	437	4	9
DBS	545	13	56	47	9	5	1	12
Countrywide	1,889	247	72	41	11	3	0	15
Lincoln National	12,808	1,031	1,918	658	1,260	622	5	18
Windsor Life	8,279	1,331	651	73	578	369	4	21
25-50% of cases resolved
Canada Life	5,439	141	1,537	369	1,168	883	16	26
Burns Anderson	413	28	85	66	19	14	3	26
Financial Options	276	72	9	5	4	2	1	29
Sun Life of Canada	25,850	5,193	4,073	295	3,778	1,935	7	29
Friends Provident	6,521	787	1,321	320	1,001	776	12	29
London and Manchester	7,826	534	2,325	329	2,025	1,525	19	31
CIS	43,603	2,129	13,847	10,113	3,734	2,427	6	34
Brittanic	17,484	2,837	3,664	1,613	2,051	1,438	8	34
Royal & Sun Alliance	15,278	1,550	4,502	662	3,840	2,958	19	34
Godwins	1,358	38	523	266	257	176	13	35
Allied Dunbar	17,754	2,263	5,341	2,108	3,233	2,195	12	37
Hill Samuel	5,916	687	1,809	393	1,416	1,116	19	37
United Assurance	12,282	725	4,364	1,439	2,925	2,528	21	38
Abbey Life	16,801	3,566	3,480	793	2,687	2,122	13	39
Standard Life	6,523	367	2,310	926	1,384	1,225	19	39
Colonial	7,977	1,807	2,018	259	1,759	1,089	14	40
Prudential	70,800	11,577	28,777	2,420	26,357	14,292	20	40
Sedgwick	10,175	2,622	1,814	731	1,083	777	8	41
Albany Life	2,844	462	1,238	70	1,168	645	23	41
NatWest	13,849	3,277	3,564	777	2,787	1,895	14	43
Pearl	40,863	1,913	23,622	4,356	19,266	11,408	28	43
Guardian	8,697	736	3,909	710	3,199	2,433	28	45
Royal London	10,860	906	5,752	1,172	4,580	2,767	25	45
Lloyd's TSB	48,028	7,395	15,325	4,741	10,584	9,556	20	45
Midland	4,740	329	2,292	358	1,934	1,490	31	46
Commercial Union	7,374	943	3,079	678	2,401	1,809	25	47
IFA Network	229	44	73	59	9	4	2	47
Over 50% of cases resolved
Wesleyan	4,307	358	2,192	667	1,525	1,226	28	52
Norwich Union	7,081	2,052	2,079	543	1,536	1,196	17	54
Hogg Robinson	1,896	632	578	174	404	220	12	54
Berkeley Independent	72	40	2	2	1	1	1	60
Legal & General	35,094	13,254	10,126	1,292	8,834	6,611	19	60
AXA Equity and Law	3,846	659	2,289	641	1,648	1,167	30	64
M&E Network	269	149	43	14	29	19	7	68
Equitable Life	11,054	5,592	2,397	1,134	1,263	992	9	70
Barclays	16,739	5,812	7,097	1,816	5,281	4,293	26	71

A: cases identified as requiring review
B: of A, cases where investor was informed that information gained during assessment excluded cases from review
C: number of assessments completed
D: cases where the investor has been informed that no redress is due.
E: cases where redress has been offered
F: cases where redress has been accepted.
G: cases where redress has been accepted as a percentage of cases identified for review ((F/A)x100).
H: cases completed, including exclusions, as a percentage of cases identified for review (((B+D+F)/A)x100).

STATEMENT TO THE HOUSE OF COMMONS FROM ECONOMIC SECRETARY, HELEN LIDDELL ON 18 NOVEMBER

With permission, Madam Speaker, I would like to make a further statement on the mis selling of personal pensions.

2. On 9 July, I reported to the House on the progress being made by individual firms with most cases to put right in what is possibly the most extensive scandal ever seen in our financial services industry. Each month subsequently, I have published the latest facts available to me. Today, I have placed in the Library further information about the progress being made.

3. We are now seeing positive results from the pressure applied since this Government was elected. In May only 2 per cent of cases had been compensated. Now there has been an 8-fold increase in the number of people receiving compensation, proof that in the cold glare of publicity, firms can raise their game and make progress. However, more could and should be done.

4. Before I go into more detail, it might assist the House if I recall the events which led to this scandal. The Social Security Act of 1986, a much-vaunted piece of legislation by the last Government, encouraged millions of people to change sound pension arrangements for something different in the belief that they would be more secure in later life. Some will be. Not all however. For some, the change meant a future less secure, not more so.

5. Between 1988 and 1994, life insurance companies, independent financial advises, banks and building societies, through vigorous marketing sold over 5 million personal pensions. It soon became clear that this meant disaster for many, including hundreds of thousands in nursing, teaching and other professions, who had been persuaded against their best interests to abandon the safety of their occupational schemes.

6. The truth is that many firms did not abide by the regulatory rules then in force requiring them to give suitable advice. Among those firms failing their customers were many household names.

7. The Securities and Investments Board in 1993 took the unprecedented step of requiring firms to review the cases of those most likely to have suffered. The scale of the problem can now be seen: some 600,000 cases are currently being reviewed and on current indications the cost of compensation will be at least 2 billion Pounds.

8. Deadlines were set for completing the most urgent reviews. These were well missed. The last Government stood by and let this happen.

9. On 14 May this year I met heads of 24 firms responsible for about three-quarters of the total of the cases; I left them in no doubt about our determination to ensure those wasted years would be redeemed.

10. Most of the big firms are making headway; indeed, some of them have made large strides. But far too many firms - from large insurance companies to small independent advisers - have been far too slow to act. Some have hardly started. They have failed to grasp the severity of the situation.

11. The experience of the past few months shows that pressure - from the Government, the regulators and the public - is working. I intend to maintain it until the review is completed.

12. In May the regulators set hard but realistic new targets for all the firms concerned and made it clear that there would be robust disciplinary action.

13. For most firms the first of these targets is to complete 90 per cent of the most urgent cases by the end of next month. Beyond that, they must complete all their priority reviews by the end of next year - at the very latest. When they reach that target, I will remove their names from the list which I publish each month, although they must continue to update me on their progress.

14. The recent reprimands and fines, against firms such as the Prudential, Friends Provident and DBS, have attracted wide publicity. This disciplinary rigour will continue. But the Government and the regulators recognise that, in respect of some companies at least, these sanctions may not be enough; they are not galvanising the laggards. For them,a stronger armoury of sanctions is required. The Personal Investment Authority is working to achieve this through individual registration and the new regime will come into force as soon as possible next year.

15. Once this regime is in place, sanctions can be fine-tuned to apply pressure directly on those responsible. Individual directors, managers or salespeople found to be at fault will face the prospect of fines, public reprimands or restrictions upon the type of work in which they may be involved. In extreme cases, they could be expelled from the industry.

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16. The public has a right to know about these failures. At present, the PIA has the power to require firms to advertise their misconduct and the grounds on which they have been disciplined. Until now, this power has been kept in reserve. There is now every reason to use it to the full. The PIA is currently examining ways to ensure that customers are informed directly of a firm`s failings.

17. Madam Speaker, the Government believes the time has come for a tougher range of sanctions to come into place. The only way for a firm or an individual to avoid disciplinary action is to avoid the conduct which warrants it.

18. While putting right the wrongs of pensions mis-selling has been the priority, the Government hasn`t lost sight of the fact that the financial services industry is central to our economic prosperity and to the welfare of millions of people. However its prosperity requires the confidence of the public. That is why the industry must act quickly to restore that confidence. If there is continuing evidence that some firms won`t learn the lesson of the past few years, and continue to harm investors, then we will act to clean up the industry.

19. To this end, PIA has the authority to intervene on behalf of the public and require that a firm ceases to market or sell some or all of its investment products for a period and puts its house in order.

20. Firms whose compliance with the regulators` requirements is so poor that investors are put at risk can effectively be put out of business. The PIA will use this power wherever warranted. Candidates for this action will include any independent financial adviser or any other firm found to be using the review process as a foot in the door to sell more products.

21. The regulators and the Government also have powers to protect the public by taking action to exclude senior people who are not fit and proper from involvement in financial services business. Those who are not fit and proper can be removed from their posts. We will see to it that they are removed.

22. In the years ahead the Government plans a number of major pieces of legislation which will have a profound impact on the financial services environment. Lessons learned from the pensions mis-selling episode will be in all our minds as we go about that task - in relation to stakeholder pensions, in relation to individual savings accounts and indeed as we reform the regulatory regime itself.

23. So far as pensions policy is concerned, we will not repeat the mistakes of the last government. We will not set people up for a fleecing. We anticipate that future decisions on the regulatory approval of stakeholder pension schemes would take into account the conduct and corporate governance of those involved. This would include, of course, their record in settling cases of mis-sold personal pensions.

24. I hope that by the combination of measures which I have outlined to the House today, we can ensure that never again will the public be exposed to such a scandal as that which I have described today, and that those who have suffered can now look to speedy redress. Justice for them has been too long delayed; this Government is determined to ensure it is delivered.