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The Actuary The magazine of the Institute & Faculty of Actuaries

Personal accounts

I welcome the presidents’ statement because it draws attention to a potential further pensions mis-selling occasion which is the last thing we, as the profession most closely identified with pensions matters, can ill afford.This is a particularly sensitive area because the group most involved are the lower paid men and women who will be retiring in the next ten to 15 years. These individuals know little or nothing about finance and could all too easily be induced to stay in the proposed new scheme because it is in no one’s interest to draw their attention to the substantial indexed state means tested allowances (SMTAs) they will almost certainly be entitled to when they retire which, I stress, for many of them is in the next ten to 15 years.

Turning to the presidents’ statement, there is a significant omission since it does not include any reference to housing benefit and council tax allowance. When these are added and the total reversionised by an index-adjusted annuity, the amounts are so large that no pension contract the lower paid could afford could possibly match them. This applies to stakeholder contracts as well as any other and there is significant evidence there could have been some mis-selling of such contracts.

It is the duty of the FSA to see that potential policyholders are, in its words, ‘fairly’ treated. For years I have been trying to persuade it to put matters to the test by requesting the life assurance companies writing stakeholder contracts to investigate whether, and to what extent, potential stakeholder policyholders were told of their likely entitlement to SMTAs. The FSA has refused to do so and now refuses to answer my letters on the subject.

In that the profession has raised the question of means tested benefits in the case of the proposed personal accounts and since the same arguments hold good regarding stakeholder pensions, should we not draw attention to this potential mis-selling which could already have taken place? Is that not very much ‘in the public interest’?