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Mr.Lilley : I shall continue a little before giving way. If a person became unemployed in 1991, having started his policy in 1988 while he was working, he would appear in the tables in the zero earnings column, but that would not necessarily mean that he had been mis-sold a personal pension. As soon as the individual began working and paying national insurance again, DSS contributions to his personal pension would resume. Of course, while he was not earning, he would not in any event have been building up any pension entitlement had he not opted out of SERPS.

Mr. Flynn : While the Minister is attacking the accuracy of Coopers and Lybrand Deloitte's conclusions, would it not be fair of him to state its main conclusion, which is that 2.4 million people are worse off because they opted out of SERPS and into a personal pension ? He may be right and the figures may be inaccurate--it could be 3.4 million or 4.4 million people.

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Mr.Lilley : That is precisely the type of remark of which Coopers and Lybrand Deloitte's press release is trying to disabuse people.

Mr. Flynn : Could it not be 3.4 million or 4.4 million ?

Mr.Lilley : The hon. Gentleman should read the press release. He would then find that Coopers and Lybrand Deloitte does not agree with that analysis. It believes it to be mistaken and says that, because of the performance of the stock market and the value of the opt-out rebate that people receive, there is every likelihood that people who took out a pension during the period of the rebate--up to last year--will have a pension which is to their advantage.

Mr. Geoffrey Hoon (Ashfield) : Will the Secretary of State comment on the following statement from the Coopers and Lybrand Deloitte press release ? It states :

"Given the impact of commission insurance charges, this means that contracting out is now only likely to be of significant benefit to higher- paid people in their 20s and 30s who are prepared to take some investment risk."

Does he accept that suggestion ?

Mr. Lilley : The hon. Gentleman should look at the whole press release. He will find the point that I have just made--that, in general, people in that period would have received an advantageous pension. What we all know about the point of age, to which the hon. Gentleman referred, is that we are pledged to, and will, introduce age-related rebates designed to make contracting out attractive to people across the whole age range. Also, in the interim period, we introduced the 1 per cent. additional rebate to extend the viability of the existing system until that age-related rebate structure is in place.

Mr. Dewar rose

Mr. Lilley : I have given way an awful number of times. Could the hon. Gentleman ration himself and possibly intervene again if he is really desperate ? [ Laughter .] I have given way infinitely more than the hon. Gentleman ever does.

The new opportunities and flexibilities that we have brought to pension provision are of clear benefit to millions of people. If there are dangers that the availability of choice can be abused, our response is clear. It is to ensure that past errors are put right, to ensure that further safeguards are put in place for the future and to ensure that sufficient information is available for sensible choices to be made.

That is the fundamental difference in the debate between Conservative Members and Opposition Members. Our response is to make choice better informed. Their response is to assert that choice should never have been allowed in the first place. Our policy is to encourage funded provision which reduces the burden on future generations. Their policy is to keep people dependent on the state and to add to the commitments of taxpayers in the future. Our approach to alleged mis-selling

Mr. Frank Field (Birkenhead) : Will the Secretary of State give way ?

Mr. Lilley : In a moment.

Our approach to alleged mis-selling of personal pensions is to see that it is investigated and, if necessary, put right. The Opposition's approach is to seek political capital from it and to alarm millions of investors unnecessarily. I entirely recognise that the hon. Member for Birkenhead (Mr. Field), as mentioned earlier, is

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unusual in his party, in that he wishes everybody to have a compulsory private pension. Those are interesting ideas. It is a reflection on his Front-Bench spokesmen that they are so uninterested in those ideas.

Mr. Field : We shall see how the Labour party fights the next general election : that is the crucial point.

I intervene as somebody who believes that we need a system in which people are in the state scheme and in a second pension scheme as well. I tried to intervene when the Secretary of State made the point that the Government were concerned to reduce liability to taxpayers. I want to bring him back to the SERPS debate.

Given that phrase about responsibility to taxpayers, does the right hon. Gentleman not believe that he has a responsibility to offer advice to those who are currently on low incomes and who may receive a low income over the next few years, that it is not in their interest, or in the interest of the taxpayers, for them to opt out of SERPS ? Does not the responsibility go beyond the individual ? Should not the taxpayer, at the end of the day, also have some say, whether it is wise or unwise to opt out, and does not the right hon. Gentleman have a duty to exercise that responsibility on behalf of taxpayers ?

Mr. Lilley : I mentioned that we have published a leaflet, made it widely available and advertised it heavily, to enable people to give advice on the sort of factors that they should take into account in deciding whether to opt out and what sort of pension provision to make.

It cannot be said that it is always wrong for someone on a low income to take out a personal pension instead of being in SERPS. That would depend on the structure of costs. That is why we have done the next important thing, which I also mentioned, of making it clear to people what the costs are, by introducing transparency. Then people will be able to see whether it is worth their while and to compare and contrast.

It is the underlying duty of those who market personal pensions to give best advice. There is evidence that that has not always been done. That has been jumped on hard--and quite right too. I have absolutely no interest in overlooking any mis-selling in the past. We must get it right, and put it right. The industry has a vested interest in getting it right, so that it can continue to provide a valuable service.

Mr. Campbell-Savours rose

Mr. Lilley : With respect, I have given way to everybody. So that the debate may continue, perhaps I may draw my remarks to a conclusion. The hon. Gentleman will have a chance to contribute to the debate again, as he has already through my willingness to give way.

Our pension promises have already brought the prospect of increased prosperity to millions of people. We have more employer schemes. We have more people taking responsibility for their own retirement income, and we have built a solid foundation of funded pension provision which is the envy of the rest of Europe. We have done that through increased choice and wider opportunity. Those will remain the characteristics of our policy in future.

6.15 pm

Mr. A. J. Beith (Berwick-upon-Tweed) : The fine words of the Secretary of State seemed almost designed to conceal a scandal of our age-- what occurred in pension transfers. It seemed that much more of a scandal because

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it involved some of the most reputable and well-known, household-name insurance companies. The one consolation is that a number of those companies are such well-established and well-funded institutions that there is at least the prospect that most of the people who suffered from mis-selling may be able to be compensated. Indeed, the regulatory authorities must insist that all those people be compensated. The size and the scale of the scandal and the involvement of so many reputable companies must be a concern. I expected it to be reflected in a larger proportion of the Secretary of State's speech than it was. Only in his closing lines did he recognise, in response to an intervention, that the Government cannot condone the mis-selling that went on ; only then did there seem to be any acknowledgement of what happened.

The sale of personal pension plans was a huge exercise. It has been estimated that more than 6 million have been sold since January 1988. A third of them were sold through independent financial advisers and the rest through tied representatives--large companies and other large companies acting as their tied agents. It is significant that two thirds of the personal pensions were sold by big companies. Much attention has been given to independent financial advisers and there have been some bad apples in that barrel. There have been many concerns in relation to people being given extremely bad advice which was based on commission. However, two thirds of the problem was generated by companies who had no business to do anything of the kind. They had the resources and the experience to do the job properly and failed to do so.

Penalties have been imposed on Legal and General Group plc, and Norwich Union Insurance Group is suspending 800 sales staff. That was significant enough for the Eastern Daily Press that this morning it was the only newspaper in the entire country that did not lead on the trials and tribulations of the Prime Minister. It led on the suspension of 800 Norwich Union staff. It is quite a big issue in Norwich, which illustrates the seriousness of the matter for large and well-known insurance companies. Norwich Union will not be the only company to be affected. Many more will be affected and will have to pay out a lot of compensation.

However one considers the Coopers and Lybrand Deloitte figures and however cautious one is about them, they clearly suggest that a large number of people on very low earnings have been wrongly advised to contract out of SERPS. As I understand it, contracting out will not simply include people who are substituting a personal pension for a state earnings-related pension, but will include people who, by transferring out of a contracted- in pension scheme, are giving up a combination of an occupational pension and a state pension for a personal pension. A number of people will have done so with earnings insufficient to cover the charges levied by life insurance. [Interruption.] It is an unusual privilege to be presented with a note from the Government Benches while I am making a speech. I shall come to it due course.

It is believed that 500,000 people have transferred into personal pension schemes since 1988. The KPMG study reveals that only 9 per cent. of client files have been treated with "substantial compliance" by firms undertaking pension transfer. That leaves room for the possibility of great financial disadvantage being afflicted on clients who left more suitable occupational schemes. The KPMG report does not quantify the losses. It was not set up to do that. The report quantifies the lack of compliance. The lack

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of compliance was almost total ; virtually no one was complying with what they were supposed to be doing. But 37 per cent. of the schemes were suspect or unsatisfactory and suspect, implying that the advice was misleading, perverse or seriously wrong. That is a serious problem.

Among the groups concerned were a number of especially vulnerable people-- for example, redundant mineworkers. About 58,000 mineworkers were persuaded to move £736 million of pension fund money into personal pension schemes, followed by 23,000 steel workers, 27,000 teachers and 32,000 nurses. I know from experience in my constituency that redundant mineworkers were hired by insurance companies to provide the names of other mineworkers who could then be approached. Meetings were organised and great promises and offers were made. The present situation is that I have mineworkers coming to me--some of them have been lucky enough to obtain fresh employment ; they are the lucky minority--who are going into a local authority pension scheme. They discovered that if they had remained in the mineworkers pension scheme, they could have transferred rights and benefits into the local authority scheme which they cannot now transfer. They have been severely disadvantaged and must be compensated under the terms that SIB described, and to which the Secretary of State referred. I intend to make it my business to see that any mineworkers in my constituency who are so affected are compensated.

When we look back on this whole episode--what happened and why--we must look first at the role of the Government. At the time, the Government heavily advertised the desirability of transferring into personal pensions. They heavily encouraged opting out of SERPS by offering rebates and the 2 per cent. inducement. The Ministers involved are now respectively the chairman of the Conservative party, the Lord President of the Council and Leader of the House of Commons, and the Prime Minister, who was the Under- Secretary of State in the Department at the time. I ask whether one would buy a personal pension from any of those three. They certainly carry a heavy responsibility for what happened, because they were involved in creating the climate in which it was wrongly assumed by millions of people that it would be better to have a personal pension than to be in an occupational pension scheme or the state scheme. It may have been better in some cases, but in many cases it was not.

Mr. Butterfill : Before the Liberal party seeks to gain too much of the moral high ground on this issue, I remind the right hon. Gentleman that for the past two years his party has failed to nominate an officer to the all-party group on occupational pensions, despite repeated requests to do so, and he is the sole representative of his party in this important debate.

Mr. Beith : If I must appear before the Almighty on judgment day and say that I am sorry that I failed to submit a name for the all-party pensions group, and the three right hon. Members whom I mentioned must appear before the Almighty and say that their advice may have led many thousands--perhaps even millions--of people to finish up with much lower pensions than they should have had, I shall be in a more comfortable position than they are. To

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assist the hon. Member for Bournemouth, West (Mr. Butterfill) with that relatively minor matter, I shall certainly try to do so.

Mr. Heald : The right hon. Gentleman complained about the advice given by Ministers to opt out of SERPS. Is not it Liberal party policy to abolish SERPS, as its 1992 manifesto says ? If that is right, how on earth will all the people in this country who want enhanced pension provision get it ?

Mr. Beith : The advice must be against what is available and what the alternatives are. In the long term, it is not sensible for us to suggest to people that through SERPS we can give them a better deal than good occupational pension schemes, or, in some cases, personal schemes can provide. The question is what advice was given to people for whom that was not the right choice at the time. The wrong advice was given both by insurance salesmen and by the Government in the general background that they provided.

The second failure was that of LAUTRO and FIMBRA. They did not produce any detailed rules until 1992. To some extent, LAUTRO appeared to have been captured by the trade that it was supposed to be regulating and simply did not discharge the job that it was given to do. In mitigation, one can say that those bodies had only just been set up and that it was difficult for LAUTRO and FIMBRA effectively to operate against the background that I described. The fact remains that it was a failure--and the biggest failure was that of LAUTRO. The biggest failure involved the biggest institutions. Part of the background was the growth of tying. A large number of other financial institutions--banks and building societies--became the sellers of only one company's products. That immediately put the consumer in a very dangerous position. If a consumer goes into a shop to buy a washing machine, even if the salesman is on commission for what he sells, at least he is selling one of a series of washing machines and will give some advice about it. It may not be an ideal position, but it is better than consumers finding their friendly building societies saying, "Of course you can have a mortgage ; we can arrange it. By the way, your insurance will be with this company or that company. We have combed the market and in every respect that company provides the best products". That provided an unsatisfactory background for many financial decisions--personal pensions in some cases, endowment insurance in many cases and a whole number of other decisions.

There was a lack of training for staff in those organisations for the job that they were doing. A large number of people went into banks, building societies and even insurance companies expecting to do one sort of job. They then found that they were under heavy pressure to make sales in a sophisticated area in which someone was not buying a small policy or an addition to his savings portfolio but was committing the whole of his pensionability--the whole of his future. That placed a heavy burden on people who were not trained to carry out that responsibility.

Then there was the commission system with all the pressure that it provided in the absence of any real public understanding of how great the commissions and, indeed, the charges were. When I say the commission system, I am referring not only to the commissions paid to independent financial advisers but to the commission-only sales forces of some insurance companies and the employment terms of

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those involved in other institutions, whose jobs or promotions were on the line if they did not sell more pension or insurance products. The insurance industry recognises the scale of the failure and what it must do to provide compensation. Most insurance companies are engaged in working on that task now ; it is going ahead. I hope that it will not be delayed too much because I am worried about the number of people who may not yet realise that they should make a claim for compensation in that way, and the need to ensure that those claims are quickly and adequately processed.

What about the future, now that all that has happened ? The new SIB rules are welcome. Those rules require, for example, transfer value analysis and a better basis for making judgments about this sort of thing. There are rules for cooling-off periods and rules placing restrictions on independent financial advisers as to whether they are capable of and equipped to carry out business of that sort. However, the rules do not go to the heart of some of the problems. They do not deal with the commission system or the dependence of staff in tied banks and building societies on the sales that they make to keep their job or level of income. The rules do not deal adequately with securing disclosure across the board.

There remains a great gap in all this. There is still no adequate provision of fee-based advice, so that someone can go to a genuinely independent adviser and say, "I want to know what is the best bargain for me. I will pay you by the hour for the advice that you give me". There are places in the market where such advice can be obtained, but people do not generally realise that it is obtainable. People do not always realise that they need to have such advice or that it is not what they are getting. The only way in which the commission system will cease to have the bad influence that it has is if more fee-based advice is available and people can see that it is genuinely to their advantage to pay a relatively small sum of money up front to get decent advice.

Mr. Butterfill : Does the right hon. Gentleman accept that, as long as we have a situation where it seems that those who pay commission to an independent adviser are paying a sum of money and those who buy from a direct seller are not suffering from the same disadvantage, fee-based advice will not become popular ? We all know that those who buy direct are paying for in-house salesmen, expensive advertising and everything else-- and they are paying in exactly the same way--but that is not immediately apparent to the consumer.

Mr. Beith : The hon. Gentleman makes more fully the point that I compressed too much. When I talk about disclosure across the board, I mean that people should be able to make a proper comparison of what they are paying through an independent financial adviser and what they pay if they go to a bank or building society and do business through the staff of those organisations, what they pay if they deal with an in-house insurance company of one of those organisations, and what they pay if they deal with one of the companies that do all their business through direct sales. There are charges, commissions and remuneration packages in every case. These can and do influence the sort of advice that is given, and this is something that the customer needs to know.

Then there is the issue of the Personal Investment Authority, which is getting off to a pretty shaky start. I

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identify two particular problems that are crucial to the future. One is the weakness in the consumer or independent director system. The criticism here is the opposite of that made by Standard Life and by the Prudential. My contention is that consumers or independent directors are not in a very strong position. They owe their appointment to the chairman and other directors, and their approval to a body created by those people. Several of them are directors of building societies anyway and are therefore already enmeshed in the system--some of the disadvantages of which I have sought to describe. That being the case, they are not in a strongly independent position. When it comes to challenging the accepted wisdom, the fact that, in effect, they are being paid £1,000 a meeting--£12,000 a year--to serve on this body might just deter somebody from upsetting those on whom he depends for reappointment. Perhaps that is an unjustified fear, but it is one which some people will hold and it casts doubt on the effectiveness of the independent side.

However, some of the companies involved adopt the attitude that there are now too many of these independent people about and that, as it is not really self-regulation, they will not have it. That was initially the view of Standard Life, although I believe that that company has now accepted that it should be regulated, and that remains the view of the Prudential. In my view, it is indefensible that the Prudential should be allowed to shop around as to who regulates it. Technically it is regulatory arbitrage, but I regard it as an unacceptable notion. I hope that the Securities and Investments Board will say that its agents regulating the Prudential will be the Personal Investment Authority, or, at least, that the Prudential will be regulated according to precisely the rules that govern those regulated by the Personal Investment Authority. I hope that the Prudential will not be able to earn one jot of regulatory lightness by deciding to go elsewhere for its regulation.

Mr. Ian Taylor : The hon. Gentleman will be interested to know that several Conservative Members agree entirely with the remarks that he has just made. It is up to us to ensure that the public realise that a body that tries to choose a regulatory authority to suit itself is not one with which they can deal confidently.

Mr. Beith : My remarks carry that implication.

Then we come to the crunch question that is implicit in the Labour party's motion : is there a statutory or direct system that would have saved us all this trouble and would be a great deal better ? We must face the fact that there has to be practitioner involvement somewhere along the line. Otherwise, people simply will not be wise to what the trade was getting up to. There must be practitioner involvement to make the system work effectively. Could that be achieved satisfactorily with a Government- appointed regulator and some sort of practitioner committee structure ? Perhaps it could, and perhaps that is the direction that we should have taken. What there is no scope for is a completely detached system of regulation which purports to have a strength that the present system does not have. We can improve the present system by making it more independent and accountable--accountable to Select Committees of the House of Commons, for example--so that it has some focus of accountability. But there is no easy, clear distinction between, on the one hand, what is known as self- regulation and, on the other hand, statutory regulation. Self-regulation is statutory in that there is a

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wide range of Government involvement. It has directors who are not part of the industry. Statutory regulation means some kind of practitioner involvement. Any system is a compromise between those elements.

Moreover, I do not believe that if we had had something that might be called statutory or direct regulation we should have prevented all that has happened in this episode. There are several reasons. The first is the atmosphere and background that I have described. Indeed, it is rather difficult for Opposition Members to imagine that the Government would have made a better job of restraining personal pension growth when their policy was to promote just that. It is rather far-fetched to think that, in this regard, they would have done better than LAUTRO.

I intend to vote for the motion as it rightly focuses on a serious problem and on the need to strengthen regulation. However, I counsel against assuming that the word "direct", which appears in the motion, or the alternative that is sometimes used--"statutory"--implies a simple alternative system that would have delivered the goods, and will do so now. There are still marked weaknesses in the system that we have. We need huge improvements in respect of disclosure, the way in which the commission system works, the provision of fee-based advice and the independence and accountability of the regulators. But we must start from where we are and learn from experience. Tomorrow's financial regulation problem will not be personal pensions ; it will be some other product. I am afraid that, inevitably, this debate is about the stable door and the horse that has bolted. We need to make the system effective to guard against sophisticated new financial products that would pose new threats to ordinary people who do not understand the complexities. That is all the more reason for working from here to build a better regulatory system than we have managed to achieve so far.

6.35 pm

Mr. John Butterfill (Bournemouth, West) : I should like to preface my remarks by reminding hon. Members of the entry in the Register of Members' Interests that shows that I am an adviser to the British Insurance and Investment Brokers' Association, which, together now with the National Federation of Independent Financial Advisers, represents about half the financial advisers in the country. I have taken a consistent interest in this matter--starting with the Committee stage of the Financial Services Act 1986, to which reference has been made, and continuing in my capacity as chairman of the all-party group on occupational pensions.

It might be helpful if I were to sketch in a little of what I see as the background to the problem. The hon. Member for Glasgow, Garscadden (Mr. Dewar) has done the House a service by bringing this matter forward for debate. There remain a number of very serious issues that the House must confront, and the opportunity to have a long and comprehensive debate of this nature is very welcome. However, we must look back to find out why this situation has arisen. First, why were occupational pensions derided by so many people ? I believe that the answer to that question was provided by my right hon. Friend the Secretary of State when he referred to the restrictions imposed by so many schemes. Many hon. Members may, even today, be victims

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of those restrictions. I have a pension scheme in which I participated when I was in my 20s. That will pay less than £100 on maturity, when I am 65, as it was frozen when I left it in my late 20s. So many people were in a similar position that there was deep suspicion--now, fortunately, removed by Government action. Then, it was necessary to rely on the discretion of trustees.

Personal pensions have a very important application for certain types of individual. Those who are relatively high earners and those who are likely to change their jobs often may well find that personal pensions suit them a good deal better than occupational schemes. For those people, personal pensions were, and probably remain, entirely appropriate. When all this was going on, there was immense public approval for the Government's proposals. [Hon. Members :-- "Oh!" ]-- Opposition Members who say "Oh!" should look at the newspapers of the period--and not just those supporting the Conservative party, but all sorts of newspapers. They were saying how wonderful these proposals were. Television programmes said much the same thing.

Mr. Austin Mitchell : Does the hon. Gentleman accept that most of the clamour of approval came from the self-interested advertising and promotion efforts of the industry itself, which wanted to benefit from massive commissions ?

Mr. Butterfill : Of course the industry was advertising, but I do not by any means accept what the hon. Gentleman says. He ought to do himself the favour of looking back at the newspapers of the period, where he would see article after article advising people what a wonderful thing this was.

The proposals coincided with the banks' and the building societies' surge into the market. These institutions decided that this was a lucrative business in which to become involved, and they therefore used all the marketing pressure of which they were capable. That had not previously happened, and pensions had been largely the domain of the traditional insurance companies. That marketing pressure is what led to an expansion of those schemes beyond all expectations. It was expected when they were first introduced that there would be about 5000,000 sales initially. The actual figure was 3.5 million. As my right hon. Friend stated, the current figure is more than 5 million. The success of the schemes exceeded everybody's expectations, and that put a lot of pressure on the industry.

Although most of the problems have arisen out of opt-outs or transfers, it is true that we have as a result a huge additional capacity which would not otherwise have existed. Many more people have been persuaded to save for their retirement in a way which overall can only be a good thing.

What are the problems that have arisen ? The first is the inadequacy of the regulation. It is quite clear that there was a total inadequacy within the regulatory structure, and I lay much of the blame for that not just on the self-regulatory bodies but on the Securities and Investments Board. There has been a total failure to address the problem of disclosure.

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) graciously allowed me to intervene on that subject. Disclosure is not merely the commission being paid to the salesman but the total disclosure of all the costs associated

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with the product, what the effect will be if there is an early surrender and what other restrictions may be placed on the investor. All those factors are needed for a person to make a balanced decision. The investor does not need to know how much commission the salesman is getting, but how many pence in his pound will end up being invested on his behalf. Regrettably, there is still a failure in the regulatory arrangements for that to become sufficiently clear. A lot of progress has been made, but more progress still must be made.

I made those points in 1986 on Committee. I remember that the Prudential told us that it was quite impossible to calculate what we were suggesting, although actuaries disagreed at the time. The actuaries have been proved right and the Prudential, once again, has been proved wrong. I believe that it is wrong today in its approach to the problem.

The other problem was that there was poor training of sales staff. That was manifestly because the huge increase in the volume of business forced companies to take on people who had probably never sold insurance or pension products in their lives and who knew very little about it. Undoubtedly inadequate training still exists, as Norwich Union has evidenced.

Mr. John Greenway : My hon. Friend surely will recall that another all-party group, of which I am chairman, went to LAUTRO for the first time more than three years ago and the problem of the lack of training of appointed representatives was identified. Does my hon. Friend agree that Norwich Union's decision and announcement yesterday shows how much we are getting to grips with it ?

Mr. Butterfill : I agree entirely with my hon. Friend. He and I have taken a long and consistent interest in the issues. It is long overdue that the major companies--particularly those with direct sales forces--ensured that they were adequately trained.

It is a reflection of the inadequacy of the training that the KPMG report-- I have here also an analysis of the report from the Association of Consulting Actuaries--shows, interestingly, that pension schemes sold by independent financial advisers--IFAs--tended to be much better advised than those directly sold by the insurance companies. One might expect that that should be the case for all sorts of reasons. An independent adviser would be more likely--indeed, would be required--to look around the market at a variety of products before coming down in favour of one on behalf of the client, whereas those who are tied can offer only the product of their own company. That factor is also probably due to the fact that many of those recruited had very little experience of the nature of occupational pension schemes. At least the IFAs knew something about them. The new recruits may have been car salesmen yesterday

Ms Abbott rose

Mr. Flynn rose

Mr. Butterfill : I will give way to the hon. Lady.

Ms Abbott : I am grateful to both hon. Gentlemen.

Does the hon. Member for Bournemouth, West (Mr. Butterfill) agree that it rather suits the industry to harp on about training ? I do not wish to minimise the importance of training, but it seems that the industry would far rather

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talk about that than about the structural problems of a commission-driven system that drives people to make sales that they ought not to make.

Mr. Butterfill : The hon. Lady anticipates remarks which I was going to come to later. I will address them now.

The hon. Lady may know that I have made a number of speeches and have written articles in national newspapers about the commission problem. It is entirely inappropriate that people should be commission-only salesman, and should then be expected to give impartial advice. I do not believe that it is possible that somebody who relies on making the next sale to feed his family can be as impartial as he should be in giving advice. I entirely agree with the hon. Lady.

Mr. Flynn : Will the hon. Gentleman confirm that it has been a deliberate policy of insurance companies to have semi-trained staff, and that the average time that people stayed in those jobs is about eight months ? Is it not in the companies' interests to do that because the poorly trained staff sold policies in a less conscientious way and did not understand what was going on ? Were not they also employed to sell policies to workmates, ex-workmates and families ? When they had done that, they were of no use to the insurance company. Has not that been a deliberate policy for many years ?

Mr. Butterfill : I accept that there may have been an element of that, but I do not think that that would have been a deliberate or conscious policy for most companies.

All the requirements of the regulatory organisations which are now in place lay great emphasis on training. I am sure that the hon. Gentleman and the hon. Lady will agree that unless we have properly trained sales staff it will be impossible for people to feel confident about the advice they have been given. Training is of paramount importance for the future, and it should have been in the past.

Not only was there a lack of experience of the nature of occupational schemes, but many of the trustees and those who were running occupational schemes were not altogether unhappy about losing some of their beneficiaries. Some were good and advised people to think two, three or four times about transferring or opting out. However, others did not because they saw that a burden on their company would be lifted.

It is also true that many of the trustees advised the actuaries who were acting for them in calculating transfer values to disregard all the discretionary benefits that would accrue to their member. As a result, many of the transfer payments were much less than satisfactory because the person selling the new scheme did not know enough about it. The people involved were therefore unable to get adequate advice on that subject.

Yet another problem was that those who were given that advice did not always take it. It has not always been mis-selling. One can quote a large number of examples of people who were advised not to do it, but nevertheless said that they wanted the independence from their occupational scheme. They did not trust the company or the occupational scheme, or they may have thought that the company might not have a secure future.

One of the disadvantages of occupational schemes, as against personal pensions, is that they rely on the continuing existence of the company that is operating the scheme. If the company goes into liquidation--as some of

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my constituents who were members of the Pynford scheme have found to their cost--the pension goes out of the window. That scheme has been frozen for about three years, and that is another disgrace, which I may bring to the attention of the House on another occasion. There have been many more problems than were immediately apparent.The hon. Member for Garscadden--

Mr. Ian Taylor : Will my hon. Friend give way ?

Mr. Butterfill : I should be happy to give way to my hon. Friend.

Mr. Taylor : At this point in his excellent speech, my hon. Friend has raised the fact that there are some problems with occupational schemes. In the context of the debate, we must focus on that aspect, too. Occupational schemes are a problem not only in the circumstances that he mentioned, but when an employee has to leave the scheme because of a change of job. There are difficulties if occupational schemes exist and there is no availability of personal pensions. We have to get the balance right in the debate.

Mr. Butterfill : My hon. Friend makes a valid point.

One of the criticisms that I would make of the otherwise excellent speech made by the hon. Member for Garscadden is that he over-egged the pudding in describing the extent of the problem. There is a danger that in doing so we will discourage people from making personal provision. There is no doubt that we should encourage people to do that, but at the same time we should ensure that there is a framework in which they can do so securely.

Mr. Campbell-Savours : The hon. Gentleman referred to the framework in which people take decisions. May I ask him a question about the regulatory framework ? Is the hon. Gentleman satisfied that Joe Palmer, with his record at Legal and General, is fit to lead the Personal Investment Authority ? The three early-day motions that I have tabled on the matter are fairly delicately put together. Would it not be good if some Conservatives Members signed the motions to show the industry that people in the House are prepared to say what the industry regularly tells us is the case ? The industry has no confidence in that man because of his track record at Legal and General.

Mr. Butterfill : I regret that I do not join the hon. Gentleman in that view. Mr. Palmer has considerable experience of the industry and is widely respected in the industry. The measures that he has taken in setting up the PIA, which was not an easy task and which I shall speak about later in the debate, have been admirable. The PIA is not perfect by any means, but Mr. Palmer is doing a good job and I wish him every success.

Before I gave way, I was referring to the extent of the problem. In the analysis that the Association of Consulting Actuaries made of the KPMG report, there are two time scales. One is the time when sales took place before additional guidance was given by the regulatory organisations. The other is after additional guidance was given. Most of the errors that were identified by the KPMG report amounted to inadequate record keeping. It is true that systems were not in place to ensure that those who sold the products kept adequate records. The lack of adequate

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