The FSA says it has found no evidence of widespread mis-selling following its investigation into the sales of policies used to contract out the State Second Pension (S2P).
The regulator says it looked at eight million policies involving S2P, formerly known as the State Earnings Related Pension Scheme (SERPS), but found only 120,000 of those needed further investigation.
The FSA launched its investigation in early 2005 after concerns were raised about sales standards in relation to Appropriate Personal Pensions (APPs) sold since 1988 - the policies used to contract out.
The investigation involved analysis of firms' sales practices and quality controls in the context of the regulatory standards that existed at the time of those sales.
As a result of that work, the FSA has concluded that there is no evidence of widespread mis-selling.
The FSA's investigation identified around 1.5% of sales out of the eight million APPs sold where the consumers were above the industry-set 'pivotal ages'.
As many such sales were not typical practice at the time, the FSA says it is possible these consumers may have been wrongly advised to contract out.
However, the regulator says there are reasons why it may have been appropriate for them to do so even if they were above the pivotal age.
For example, some consumers may have wanted the option to leave their pension savings to their dependants if they died before retirement, or they may have preferred control over their investments rather than relying on government pension policy.
Vernon Everitt, director of retail themes at the FSA, says: “We have conducted an extremely thorough investigation and analysis of this issue and found no evidence of widespread mis-selling of policies used to contract out of SERPS/S2P.”
Stephen Haddrill, director general of the ABI, adds: “The FSA has conducted a thorough investigation.
"Individual companies themselves set 'pivotal ages' as a guide for customers and advisers on whether people would benefit from contracting out. There was no regulatory requirement for them to do so.
“As the FSA says, many people who contracted out despite being above the pivotal age may well have had good reasons of their own.
“Where customers now have any concerns, companies will consider them carefully. The FSA is right to look at this issue firm by firm through the normal and effective supervisory process.”
To assist those who may have been above the pivotal age at the time they contracted out, the FSA will be publishing a step-by-step guide later this month explaining where grounds for complaint may exist and, if so, what steps consumers should take next.
The FSA is also updating its existing information which helps consumers decide whether or not to contract out of S2P, going forward, and explains what consumers should do if they believe that they were wrongly advised.
In addition, the FSA will continue to monitor the number of complaints received by the Financial Ombudsman Service (FOS) in case these indicate issues in past sales at particular firms.
Everitt adds: “For the 1.5% of sales to consumers who were above the pivotal age, our step-by-step guide will help them to understand if they are affected and, if so, what to do next.
“We will also continue to follow up issues with individual firms as part of our continuing supervision of them.”
The consumer guide will be available towards the end of May on www.moneymadeclear.fsa.gov.uk or from the Consumer Helpline on 0845 606 1234.
In addition, a report about the investigation of sales of Appropriate Personal Pensions will be published at the end of May.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Scott Sinclair on 020 7034 2636 or email [email protected]IFAonline
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