Prudential is worst offender in secret PIA pension documents

Prudential, Pearl, Legal & General and TSB head a secret list of insurance companies with the worst record in dealing with the pension transfer scandal.

According to documents obtained by The Independent, these companies are among 26 which have contributed almost three-quarters of the 560,000 mis-sold pensions now under review.

Details of the review, overseen by the Personal Investment Authority, the financial regulator, were supplied to its board members at a meeting earlier this month.

The figures were deemed so sensitive that those present were asked to hand back their copies to be destroyed after the meeting.

Despite an undertaking by the PIA that priority cases would be dealt with by the end of last year, only 14,000 policyholders had been offered compensation totalling pounds 26.75m by the end of last month. Fewer than that have received it.

So concerned is the PIA at the failure of its members to carry out the reviews that Colette Bowe, the regulator's chief executive, presented a paper at its board discussing the merits of "naming and shaming" the worst offenders.

Ms Bowe has warned the Treasury that unless progress is reached on dealing with the problems, including a change in rules to allow more information to be disclosed by public sector schemes, it will "discredit" the regulatory system.

However, Ms Bowe's paper, jointly written with other senior PIA officials, warns that setting new deadlines for members "might simply provoke cynicism and downright disbelief; we will be creating a new rod for our own backs".

The pensions review was set in motion in the wake of a report in November 1994 by the Securities and Investments Board, the top City regulator. The SIB report argued that some 1.5 million people may have been mis-sold a personal pension or wrongly advised to leave a company scheme.

Compensating victims of the scandal was initially thought likely to cost the industry more than pounds 3bn, although this has since been revised downwards.

Of the victims, some 350,000 were deemed to be "priority cases", where the policyholder has already died or is close to retirement. Priorities include cases where a person was encouraged to leave an existing company scheme, join a personal pension and transfer all the occupational funds into it.

In March 1995, the PIA, which took charge of the pension review, said it wanted urgent cases dealt with by Christmas. But it has been embroiled in a series of battles with companies and financial advisers, delaying the process by more than a year.

The documents seen by board members show that Prudential has identified more than 41,000 priority cases. So far, however, the company has offered redress to just 10 cases.

Other offenders include Co-operative Insurance and Pearl, which have racked up more than 36,000 priority cases each.

Each company has now completed assessments of about 1,350 cases, with the Co-op offering redress to just 10 people and Pearl to about 650.

Legal & General, another leading UK insurer - whose chief executive at the time was Joe Palmer, the PIA's current chairman - has 24,500 priority cases and has offered compensation to just 214 people.

Independent financial advisers, who have cornered more than 40 per cent of the personal pensions market, contributed a relatively low 15 per cent of cases needing review. IFAs have also completed more than one third of all the cases so far assessed.

The secret report by the PIA also shows vast differences in the responses from policyholders to letters from companies asking them to take part in the review. Some 58 per cent of the Pru's customers replied, compared with less than 50 per cent of Norwich Union clients.

A Pru spokesman said: "The redress we have so far offered does considerably understate the work we have carried out for this review. We have sent out 663,000 questionnaires to policyholders, plus a reminder. We have about 200 people working full-time on the pensions review in four different offices and have committed more than pounds 20m to getting it right."

A PIA spokesman refused to comment on the document.

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