Investors who were wrongly advised to opt out of their company pension schemes to start personal ones were thrown a compensation lifeline this week, when the Personal Investment Authority, the financial services watchdog, issued guidelines on their cases.
The PIA hopes that the most urgent cases, some 350,000, will be dealt with by the end of 1995, and the rest by the end of 1996.
Cases will be looked at according to urgency.
The PIA's rules on compensation apply to only two sections of the total 1.5 million people who may have been mis-sold a personal pension.
They are so-called opt-outs, where a person was persuaded to move funds from a company to a private scheme.
Also due for accelerated consideration are those who could have joined company schemes but were advised not to. While the total number of these two categories could be up to 1 million, only a third are thought to need compensation. Even so, the insurance companies' compensation bill could top ?3bn.
Guidelines for about 600,000 transfer cases, where people shifted their pensions out of a company scheme where they formerly worked, are due shortly.
Here are some points to note:
q Savers in the urgent categories, or their dependents, will be contacted by the company concerned.
q They will complete a questionnaire to establish whether compensation is offered.
q Should policyholders not be contacted, they should write to the company concerned.
q If the independent advice firm has gone bust, the PIA's pensions unit should be contacted instead.
q To prove bad advice it is necessary to show that the salesperson did not take full account of the benefits a client was entitled to. Also, that unrealistic expectations of the private scheme's benefits were given.
q The preferred means of compensation will be to reinstate people to their old funds. But if a fund charges too much for reinstatement, the insurer can offer to top up the existing personal pension instead to match the presumed benefits of the old scheme. Savers can refuse this and appeal to the PIA Ombudsman.
q Should top-up be the only option, written guarantees should be sought that all benefits at retirement will be considered.
q If personal distress has been caused, policyholders are entitled to separate compensation for this.
PIA Pensions Unit: 2nd Floor, Hertsmere House, Hertsmere Road, London E14 4AB; tel: 0171 417 7001.
PIA Ombudsman: 1 London Wall, London EC2Y 5EA; tel: 0171 600 3838.
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