Examination of Witnesses (Questions 120-124)
SIR CALLUM
MCCARTHY
AND MR
JOHN TINER
8 NOVEMBER 2005
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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