City watchdog to probe 30m insurance policies

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THE City watchdog has confirmed plans for an inquiry into 30 million financial policies sold between the 1970s and the turn of the millennium amid fears over “rip off” charges and sub-standard service.

The Financial Conduct Authority (FCA) said it was investigating policies worth around £15bn, sending shares in insurance firms slumping into the red once more after a torrid past week for the sector.

It will launch the investigation in the summer, scrutinising the treatment of customers who took out products such as private pensions, endowments, investment bonds and life insurance over a 30-year period.

The FCA is particularly concerned that many loyal customers of these older policies, many of which are no longer being contributed to, are not getting the same service as new customers and are locked in with high exit penalties preventing them from switching.

The FCA stressed that it was not planning to scrap exit penalties for all policies sold between 1970 and 2000, as long as they were compliant at the time.

The move is a fresh blow for the industry just a week after the Chancellor gave pensioners the freedom to draw down as much or as little of their pension pot as they want, removing the need to buy an annuity.

And it follows the pledge by Pensions Minister Steve Webb to launch a “full frontal assault” on pension schemes giving poor value as he announced that a 0.75 per cent cap will be imposed on charges from April next year.