‘No pensions chicanery went on here’ says FSA
There is no evidence of wide mis-selling of policies used to opt out of the State Second Pension (S2P), according to the Financial Services Authority (FSA).
The FSA has been investigating the sale of policies known as Appropriate Personal Pensions (APPs) since 2005 and it has ruled that many of the “contracted out” savers had made the wrong decision to buy an APP.
But the FSA has also acknowledged that the majority of the sales adequately met the regulatory standards of the time.
The chance for people to leave the S2P, and its precursor Serps, was Tory policy in the late ’80s and early ’90s, when the party wanted to expand private pension saving.
In return for opting out of the S2P, the Government pays part of an individual’s National Insurance contributions into an APP, which is then invested to turn into a lump sum for retirement.
Of the eight million APPs that were sold, about 120,000 – or 1.5% – were purchased by people too old to benefit from the product.
However, the FSA found that though some customers may have been wrongly advised to opt out of their S2P, many still had good reasons to do so.
“Some consumers may have wanted to leave their pension savings to their dependants if they died before retirement,” said an FSA spokesperson. “Or they may have preferred control over their investments rather than relying on Government pension policy.”
The FSA’s conclusion was welcomed by the Association of British Insurers.