Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 120-124)



  Q120  Chairman: That is a good, quick answer. On the splits issue, as you know from the discussion we have had with you, I have mentioned that Mike Ellis has been to see me on that, the Fund Commissioner, and I presume you are quite happy with the way that he is going about his business, so I will not focus on that aspect if you are happy. But the FSA has spoken about "phoenix" firms, that is firms where the directors of one limited company move the assets to a new company, leaving their liabilities behind and avoiding claims from customers. I am not going to ask you to comment on any individual firms, but are you making every move to ensure that "phoenixing", as it is called will be a thing of the past?

  Sir Callum McCarthy: We have stopped a dozen instances of phoenixing and we believe that this is an issue that we have to deal with and are dealing with.

  Q121  Chairman: How many companies remain outside the compensation scheme for split caps investments agreed with the FSA, and what advice would you give to investors in split caps funds that are outside that deal?

  Mr Tiner: There are three firms outside the settlement, Chairman, we know. Two of those firms are currently in enforcement proceedings at the FSA and one of them is in administration. Our advice all along has been to investors in splits that if they feel that they have grounds for a complaint to the company and ultimately the Ombudsman, then they should make those complaints, and we understand that the Ombudsman has quite a number of complaints from those firms.

  Q122  Chairman: Could you summarise the results of your research into the financial impact on consumers who have contracted out of the additional State Pension scheme compared to the position they would have been in if they had remained contracted within? And regarding the future decisions about contracting out, your research indicated that on the basis of the projected returns contracted out investors are "in all cases likely to be worse off vis-a"-vis State 2nd Pension benefits foregone" in 2005 and 2006. How have you communicated this to consumers?

  Mr Tiner: The forward-looking issue is the question of what is in the best interests of the consumers' interests.

  Q123  Chairman: Also the results of your research.

  Mr Tiner: If we look at the results of the research it suggests that consumers might be £4 worse off per week from having opted out, but of course this number is moving all the time because it depends on markets, and at one point in the mid-90s, when the Securities and Investments Board wrote a paper, the very strong advice from the actuarial profession then was that opting out was a better option—the markets were stronger.

  Q124  Chairman: What you are saying is that some people could lose up to £800 a year.

  Mr Tiner: That is what our actuaries tell us about the potential risk.

  Sir Callum McCarthy: But I would say that it is extraordinarily difficult because it not only depends on the series of market conditions, but it also depends on a series of government decisions about future pension policy. It is an area where I think that it is very difficult for anybody at all to predict what the position will be. We commissioned research, we put it up on our website but it is a very difficult set of issues to deal with and to know what will happen.

  Chairman: With that final word I would like to encourage you to keep using the crystal ball on that and come back to us with some further information. Sir Callum and Mr Tiner, thank you very much for your time.

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