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Thursday, 27 June, 2002, 15:04 GMT 16:04 UK
Pensions scandal costs 11.8bn
Salary advice
People were wrongly advised to move out of their occupational scheme
The Financial Services Authority (FSA) has announced that the pensions mis-selling scandal will have cost insurers and financial advisers at least 11.8bn in compensation payments.

More than one million customers who were mis-sold personal pensions and pension top-ups are in the process of receiving pay-outs.


This was a massive debacle. We just hope it never happens again

Malcolm McLean of the Pensions Advisory Service
The City watchdog said 1.7m consumers will have had their cases reviewed by the end of June and received their payments.

Since the beginning of the review into pensions mis-selling, the UK's financial services watchdog has taken disciplinary action against 346 firms, resulting in fines totalling just under 10m.

In addition to a review of pensions, the FSA has also been undertaking a review of how top-up schemes - so-called free standing additional voluntary contributions or FSAVCs, were sold.

The Financial Services Authority has been looking at whether some people were wrongly advised to take out an FSAVC when they would have been better off joining their company's voluntary contribution scheme.

Extent of problem

Malcolm McLean of the Pensions Advisory Service (Opas) told BBC News Online that the overall costs announced on Thursday was indicative of the widespread mis-selling, which took place.

He said: "It just shows the extent of the mis-selling. The whole point of this exercise was to put people back in the position they would have been in the first place.

"This was a massive debacle. It should never have happened and hopefully people will learn from it. We just hope it never happens again."

Personal pension mis-selling?

The personal pensions mis-selling review began in 1994, and was aimed at people wrongly sold personal pensions between 29 April 1988 and 30 June 1994.

Mis-selling occurred when people who would have been financially better off at retirement in their employer's pension scheme were advised to leave or not join their employer's pension scheme.

The FSA prioritised older consumers or those near retirement.

The second part extended the review to younger consumers, typically in their 30s and 40s.

Topping up

The FSAVC review has looked at about 10% of FSAVC sales.

FSAVCs are a pension top-up policy which is taken out with an investment firm, and separate to an employer's pension scheme.

They are different to additional voluntary contributions (AVCs). This type of top-up policy is run by employers, and contributions are normally taken from pay.

The review has looked at situations where investors would have been better taking out these additional top-up schemes with their employer rather than a FSAVC.

Further information

Companies are in the process of writing to people and offering compensation.

Firms involved in the mis-selling of FSAVCs and personal pensions mis-selling must complete their reviews and make their compensation offers by the end of 2002.

The FSA advises anyone who feels they were the victim of mis-selling to seek advice from its website.

Alternatively, the FSA has a helpline (0845 606 1234).


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See also:

13 May 02 | Business
20 Oct 98 | Business
21 Sep 98 | Business
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