11.8 billion compensation for pensions and FSAVC reviews

Figures issued today by the Financial Services Authority (FSA) show that the pensions review is over 98% complete and that the FSAVC review has reached its target of 90% of cases being dealt with by 30th June 2002.

Philip Robinson, Director of Pensions Review at the FSA, said:

"The pensions review has delivered appropriate redress by the target date for the vast majority of investors. We will continue to work hard to ensure that the small number of remaining cases are dealt with effectively."

Pensions review

By the end of June, the FSA anticipates that 1.6 million reviews will have been completed and 90% of redress will have been paid and the rest should be completed by the end of 2002. The FSA will be closely monitoring firms progress with this.

Outstanding Cases

The industry still has 2% of cases to complete. The FSA will take the appropriate regulatory or enforcement action to bring about completion of these cases. Since the beginning of the pensions review, the FSA has taken disciplinary action against 346 firms, resulting in fines totalling 9,627,250.

For those cases where a firm is no longer in place to complete the review, the FSA and the Financial Services Compensation Scheme (FSCS) will step in to complete the review where a loss is shown. So far, the FSA has dealt with 54,000 such cases and has a further 30,000 in progress. The FSA will also have to deal with any further cases left incomplete by the Industry following regulatory action.

Consumer Help

Any consumers with queries about the pensions review can either access the FSAs consumer website, where information with frequently asked questions can be printed off, or contact the Consumer Helpline on 0845 606 1234 for a copy of the information.

Consumers with queries that arent answered by the website information can call the pensions review helpline with any pensions review queries on 020 7417 7001.

Consumers can also contact the FSCS helpline on 020 7892 7300 or find out more about FSCS on its website www.fscs.org.uk

FSAVC review

As at the end of June, more than 87,500 offers of an estimated total of 300 million in redress will have been made. The target of completing 90% of cases by 30th June 2002 was set when the scope of the FSAVC review was widened in June 2001. All remaining offers must be made by the close of 2002. The FSA will be closely monitoring firms' progress with this to ensure they also meet the second target date.

Consumer Help

If consumers have any concerns or queries relating to the FSAVC review they can call the FSAs Consumer Helpline on 0845 606 1234.

Notes for editors

1. The personal pensions mis-selling review 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 employers pension scheme were advised to leave or not join their employers pension scheme (opt-out and non-joiner cases), or where they transferred pension benefits from a previous employers scheme and out a personal pension plan instead. The priority phase of the review of mis-sold pensions involved older consumers at or near retirement. Phase 2 extended the review to younger consumers, typically in their 30s and 40s.

2. The FSAVC review is a focused exercise, similar to that used for Phase Two of the Pensions Review, covering around 10% of FSAVC sales. The categories covered by the review are matched AVC schemes, where the investor could have benefited from extra employer contributions, and other subsidised AVC schemes where the employer could have enhanced contributions.

3. Final pensions review costs are estimated at 11.5 billion in redress and 2 billion in administration costs.

   Final FSAVC review costs are estimated at 330 million in redress and 80 million in administration costs.

4. For both the pensions review and the FSAVC review, if the firm which gave the advice no longer exists or has left the regulatory system, the FSAs own Pensions Unit carries out the loss assessment in respect of the relevant customers of that firm. If the FSA finds that a loss has occurred, the case is passed to the Financial Services Compensation Scheme (FSCS). It is then the role of the scheme to decide if the loss was the result of bad advice and to provide redress where it is due, once it has satisfied itself that the firm which gave the advice is itself unable to meet the redress liability.

5. Windfalls

   Pensions review 24 000 cases cannot be completed by 30 June 2002 due to the result of the judgement in Needler vs Taber which affects how the value of windfalls received by investors should be treated in the pensions review. If their case has not already been completed, an investor who received the windfall as an addition to the policy value may receive additional redress as a result of this case. Such cases are unlikely to be finally completed by the Industry until the end of 2002, at the earliest, due to the need to consult on the revised pensions review provisions. If these cases had been included in the 30th June percentage, the industry would have been 97% complete.

   Our proposals on dealing with windfalls paid as an addition to the policy value were published on 28th February 2002. The consultation closed on the 28th May and we intend to publish final guidance by 31 July 2002.

   FSAVC review - there are 1,250 FSAVC review cases similarly affected. We expect that firms will be able to deal with these within the outer time limit for the FSAVC review of 31 December 2002.

6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000; maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.

7. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

8. The Financial Services Compensation Scheme acts as a safety net for customers for authorised finance sector firms. The Scheme pays compensation to consumers who have claims against firms that are unable to pay them, usually because theyve gone out of business or become insolvent.