Imagine that you go to see your specialist and cancer is diagnosed. It is not immediately life-threatening, but will almost certainly involve months off work and potentially expensive treatment. In theory, critical illness insurance aims to resolve the situation by paying a lump sum at diagnosis. More than 700,000 people are truck down every year by strokes, heart attacks and cancer. Most survive for at least two years.The advantage of having such cover is that the person affected knows that any immediate financial problems can be solved.

Until recently, differences between companies over how each illness was defined, meant policyholders could not be certain they had proper cover As Nic Cicutti explains, things are beginning to change. However, some companies are believed to have high charges - paid by the employees.Designated Pension Plan:Proposed by OFT as a portable pension throughout a person's working life. Intended to be cheap and able to accept employers' contributions as and when they are made.- Nic Cicutti. Critical illness insurance aims to help not after death but on diagnosis of life-threatening disease. When an employee leaves, s/he can carry that segment of the GPP with them to a new employer if they wish. These are the present and proposed kinds of pension- Defined benefit or final salary: Linked to a proportion of final salary, typically either 1/60th or 1/80th for each year with employer.

Considered the cream of the crop for employees, because they mean guaranteed benefits. But they penalise those who spend only a few years with the firm, particularly at the beginning of a career. They lead to uncertainty for employers, who must deliver the benefits no matter what investment returns have been.Defined contribution or money purchase:Contributions made by employers and staff into a fund which is invested. This produces a lump sum out of which an annuity (annual retirement income) is bought. Employers prefer defined contribution schemes because they do not have to guarantee benefits, only payments into the scheme, which they can set as high or low as they want.Personal pension plans:Private arrangements, whereby a person pays a certain amount each month or annually into a scheme run by a life insurer or similar provider. The money is invested and at retirement the lump sum buys an annuity. Employers rarely pay in.Group personal pension schemes:Similar to individual private pensions but the employer makes contributions into each person's scheme by paying a lump sum to the provider, who then distributes sums to each pension plan.

Should at least that issue be addressed?John Chapman was a senior official at the OFT, responsible for competition policy in the financial sector. He was the author of several OFT reports, including one that led to full disclosure by companies of the charges they levy on products they sell.. The intended "beneficiaries", the employees, simply did not know what poor value their defined contribution company plans were.There is the very great, and continuing, problem of the personal pension industry, where at least one in three plans result in losses. It is difficult to judge the likely impact.Overall, the attractiveness of DPPs is blunted by the probable controversies with the fund management industry, with employers and with the pensions industry and by uncertainties over its workings, costs and possible impact.No indication is given about how they would fit with the present pensions industry. DPPs would lead to fewer people using defined benefit schemes, which covered six times as many private sector employees as schemes in 1994, and the loss of the protection against risk and the certainty they provide. Ministers should consider pressing for improvements in defined benefit schemes.The startling aspect of the OFT report is what it does not cover. Their management would be left to "separate corporate entities".