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Pension schemes - History Of Pension Problems

Pension schemes - History Of Pension Problems
Published:  22 Feb at 6 PM
In the past few years there have been many scandals and issues raised with pensions, often down to less reputable providers but also down to more unforeseeable circumstances. The real problems started in 1988 with the introduction of personal pensions which at the time were offered to provide more options to those looking to put money away for their retirement. The key thing to remember though is that the pension scheme itself is quite a successful idea with few problems arising from the schemes but more from the way they are sold to individuals or the way in which the pension providers abide the regulations.

The primary problem was with the enforcement of the regulations and the watchdog who is tasked with ensuring the providers manage and maintain the funds effectively. Many felt that whenever a scandal emerged, it appeared that it was atleast in some part down to the negligence of these individuals and their failure to appropriately maintain the necessarily high standards. This was made even worse by the fact that even when they were clearly guilty of negligence, nothing really changed. Perhaps one individual may resign over the matter (but made to feel better with nice fat pensions or pay-offs) or may get fined but it didn’t change a regulatory system that was clearly broken.

One of the biggest issues that arose was in the late eighties and early nineties during which time individuals were encouraged by pension providers to move away from their work-funded occupational pensions. Many people believe that this is down to the Conservative government at the time who passed a law stating that is not longer compulsory for companies to provide occupational pension plans to their employees and in turn creating a gap in the market, quickly filled by personal pension plans. These plans, with the help of large advertising campaigns funded by the providers, became very popular. However, it soon became apparent that those who had switched to personal pensions from their occupational ones, were significantly worse off due primarily to the fact that they no longer had their employers contributions. They were also suddenly subject to the charges and fees associated with the personal pension plans, not to mention the decreased flexibility.

As a result of this, around 2 million people who were believed to have been mis-sold their pensions were eligible for compensation although by 2000, the loose deadline for complaints set by the FSA, only about half of that number have lodged a complaint. The main thing to learn from these issues is that you can’t just rely on the regulatory bodies to protect you from these incidents, you must do your own research into these providers.

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