'No evidence' of mis-selling over state second pension

There is no evidence of widespread mis-selling of policies used to contract out of the state second pension (S2P), the Financial Services Authority (FSA) has claimed.



After concerns were raised, the body launched an investigation into sales of the alternative policies since 1988, but found no evidence pointing to consumers being wrongly advised to contract out of the S2P.

The FSA said that it had identified about 1.5 per cent of sales (120,000 policies) out of the eight million Appropriate Personal Pensions (APP) sold in which consumers were above the 'pivotal ages' set by the industry.

While it conceded that these consumers may have been wrongly advised to contract out of the S2P, it added that there may have been good reasons for them buying an APP even if they were above the pivotal age, such as wanting more control over pensions or wanting to leave savings to dependents if they died before retirement.

However, the Financial Services Consumer Panel and Which? have both called for statements comparing the value of contracted-out pensions and the value of the S2P given up to be sent to those who may have been mis-sold.

"The 120,000 people identified by the FSA, who may have been wrongly advised to contract out of the state second pension, could end up incurring a combined lifetime loss of £780 million," claimed principal researcher at Which? Teresa Fritz.

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