Personal pensions mis-selling bill tops £13 billion

The government's personal pensions watchdog, the Financial Services Authority, has announced that the pensions industry is footing a £13.5 billion bill for mis-selling pensions. This is up on earlier estimates of the likely total cost.

In the initial years of the new personal pensions - between 1988 and 1994 - many personal pension providers such as major banks and insurance companies and financial advisors were guilty of advising thousands of people to leave or not to join their employer's pension scheme in favour of taking out a personal pension.

In the first phase of a review carried out by the regulator workers at or close to retirement were dealt with as a priority. Some £3.6 billion was paid out in redress to 406,000 people.

Phase two of the review covers people in their thirties and forties and the level of redress is estimated at £7.5 billion. This is well up on an earlier estimate of £3.4-£5.8 billion. So far just over 300,000 cases have been reviewed in the second phase and redress totalling £.17 billion has been accepted in 199,000 cases. This leaves over 500,000 cases still to be dealt with.

Firms have until 30 June 2002 to complete the second phase by which time all those affected should have received either an offer of redress or an explanation of why none is due.