The IFA Life Offices Group of the ABI today announced that PASS Loans Ltd will start operations on 14 January 1999 with a loan fund of £100m, to help independent financial advisers (IFAs) manage the redress costs of the review of personal pensions required by the Financial Services Authority.

Loans, which will be guaranteed by the life offices through PASS, will be underwritten and made available by the Royal Bank of Scotland at the prevailing bank base rate plus 2% for a term of 8 years. The loan for each firm will be capped at the firm's annual commission earnings or £250k, whichever is the lesser. Loans will only be available to pay actual redress due and will not cover administration costs or fines imposed by the regulators.

All PIA-regulated IFAs will be considered for the loans, on a first come, first served basis, subject to the due diligence and the terms of the scheme. Network members will be treated as a firm in their own right in respect of loans requested to pay redress due on pre-network business.

Commenting on the launch of the scheme, Roy Nicolson, Chief Executive of Scottish Amicable and Chairman of PASS said:

- "The launch of PASS Loans Ltd is clear evidence of the life offices' support for the IFA market, and also evidence of our desire to see the Pensions Review completed as soon as possible for the good of the consumer and the industry as a whole. This is the first time an initiative has had such widespread support within our industry, with 100% of the IFA Life Offices backing PASS."

The launch of PASS Loans Ltd follows on from, and supports, the successful launch of PASS review Ltd in July 1998. The aim of PASS Review Ltd is to support IFAs in completing the review of relevant personal pension cases. It offers a comprehensive IFA Guide to the Pensions Review, a Helpdesk, a Healthcheck Service and a Loss Assessment Service for smaller IFAs regulated by the Personal Investment Authority. Over 2,000 IFA firms have already registered to use the services on offer.

PASS Loans Ltd completes the implementation of recommendations put forward following extensive research carried out by the ABI and PricewaterhouseCoopers at the beginning of 1998, which suggested that smaller IFAs needed practical and financial support in order to complete their Pensions Reviews to the standards required by the regulators. The structure of PASS and its services was then devised with advice from City solicitors Beachcroft Stanleys.

Mark Penton, Chief Executive of PASS, said:

- "The work undertaken in recent months since the launch of PASS Review Ltd has confirmed the need for the loan support. Pensions review liabilities have built up between 1988 and 1994 and it is only sensible that the resulting cost of redress can, in effect, be spread over a similar period, enabling IFAs to trade through what should in reality be a short-term cash flow problem.

"I am especially pleased to be working with The Royal Bank of Scotland on this scheme. RBS came through a tough tender process and have relished the challenge posed by a unique arrangement."

Lord Hunt of Wirral, Senior Partner of Beachcroft Stanleys, said:

- "My legal team and I are very proud to be associated with PASS and all it has achieved as a result of the innovative approach of the life offices and would like to pay tribute to all those involved in this unique project, where 30 separate life offices have reached agreement in a comparatively short period of time on a range of complex issues."

The PIA has considered the implications for firms' Own Funds of replacing liabilities arising from the Pensions Review with a PASS loan. It has announced the manner in which it has decided to adjust its Own Fund calculation so as to provide that firms are not disadvantaged in that respect by receiving a PASS loan.

Individual letters will be sent to IFAs in January to inform them about the scheme, which is open to IFAs whether or not they have registered to use other PASS services.

The basic terms of the Loan Scheme are as follows:

• Facilities available up to the lower of £250,000 or one year's commission/fee income of the IFA



• Facilities are unsecured



• Facilities attract an interest rate at 2% above bank base rate



• Facilities will attract an arrangement fee of 0.5% (subject to minimum charge of £250 and maximum charge of £1,000)



• Facilities will be opened for a period of 8 years



• Drawdowns against facilities will be available for the first 3 years



• Monthly payments for amount repayable will be made by direct debit



• Loan drawdowns will only be accepted on evidence that the amount is required to meet redress payments



• Early repayments of loans, full or partial, can be made without penalty.

Notes

1. IFA enquiries about the Loan Scheme should be directed to RBS, Business Banking Direct on 0345 573 196 (9.00 am to 5.00 pm Monday to Friday). Queries about other services provided by PASS should be directed to the PASS Helpdesk on 0870 900 7277 (9.00 am to 5.00 pm Monday to Friday).



2. The ABI's IFA Life Offices Group announced on 21 July 1998 that Pension Advisers Support System Ltd (PASS Limited) had started operations to help IFAs with their reviews of personal pensions sales required by the Financial Services Authority. PASS Review Ltd is a subsidiary of PASS Limited.



3. The life offices supporting the initiative are listed in Appendix 1.



4. PASS Review Ltd's services already made available include the first four sections of a comprehensive IFA Guide to the Pensions Review covering:
   
   

   · Population Identification
   
   · Information Gathering, Loss Assessment and Redress
   
   · Compliance and Causation Assessment
   
   · Phase 2

   
   
   Access to a Helpdesk to answer their questions on the review, a Healthcheck and Loss Assessment Service.



5. To date over 2,000 firms have registered to use the PASS services.



6. The implications for a firm's own funds was detailed in the PIA Regulatory Update No 56 issued in September 1998.



7. Press enquiries to:
   
   Vic Rance 020 7216 7440 (Home: 020 8647 5188)
   Mark Penton 0114 208 7998 (Mobile: 0411 473041)
   Jeff Holland 0114 208 7971
   



8. An ISDN line is available for broadcasts.