Fears over PRSA selling dismissed

FEARS that the drive to promote personal retirement savings accounts (PRSAs) could lead to a wave of mis-selling on the Irish market have been dismissed by groups on both sides of the pensions market.

Due to come on the market next February, the new pension plans are designed to boost private pension cover in Ireland from 50% to 70% of the working population.

Concerns about the market and its regulation were raised following disclosure that a top pension provider in Britain has been fined £1.3 million for failing to identify 13,500 people who had been mis-sold pensions.

However, both sides of the pensions market said concerns about a similar situation emerging here were unfounded.

An Irish Insurance Federation spokeswoman said the problems in Britain that led to Royal and Sun Alliance being heavily fined go back to the Thatcher era.

During those heady days thousands of people were persuaded to pull out of their company pension plans to buy private cover, which seriously undermined their ability to fund their retirement.

In Ireland, however, where firms provide a pension plan it is normally obligatory for employees to join the scheme.

That provision alone provides a big safeguard, said Jennifer Hoban, life insurance manager at the Irish Insurance Federation.

In the context of the Irish market, the circumstances do not arise for the kind of debacle that hit Britain in the 1980s and early 1990s, when that market was awash with the optimism spawned by Thatcher, Ms Hoban said.

Mary Hutch, spokeswoman for the Pensions Board, said the board will fully vet PRSAs before applicants are cleared to provide the service.

To date, the board is not aware of any kind of mis-selling in this market, and while it does not have a regulatory function in this area its approval for new PRSAs will authenticate them from the very start.

Critics of the plan say the difficulty is that those not in pension plans who should really be taking up the new schemes are unlikely to do so in any great numbers.

And they say the pensions dilemma the Government is trying to resolve will get worse as a result of the introduction of PRSAs in early 2003.

Applications for PRSAs will be taken from potential providers starting on November 11, the Pensions Board confirmed yesterday.

It is reckoned it will take three months to clear each application so the first product offerings are unlikely to be on the market before early February, according to the board.