News - Consumer alert over extra pension
Six million people are to get a letter from their pension provider advising them to review their move to contract out of the State Second Pension (S2P).
People will be told to reassess if they would be better off paying into the S2P rather than their private pension.
The pensions industry said the letter was part of an initiative to inform and educate consumers.
But one consumer group fears the letter does not give enough practical advice to people for them to make a decision.
Growing concern
The S2P is the new additional pension system.
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 We believe the situation is so serious that we are calling upon the Financial Services Authority (FSA) to conduct a full market analysis
Tereza Fritz, Which
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It replaced the State Earnings Related Pension (Serps) on 6 April 2002.
If you contract out of the S2P into a personal pension scheme, such as a stakeholder, you will pay the same National Insurance contributions.
And the Inland Revenue should top-up that personal pension, through an annual rebate, with the amount equivalent to what you will have paid towards your additional state pension.
However, there has been growing concern that consumers could have been badly advised by financial advisers to contract out.
Shortfall
Which, formerly known as the Consumers’ Approach estate estate finance hill in insurance irwin mcgraw principle real real series value
, has estimated that some people are in line to receive 60% less pension than they would have received if they had not opted out of the state scheme.
The letter being sent to six million people has been put together by two finance industry bodies, the Association of British Insurers (ABI) and the Association of Independent Financial Advisers (AIFA).
The letter will advise consumers of the following:
- They should review their decision to stay opted out of the S2P each year
-
Export finance and insurance
out should not be based solely on the expectation that a bigger pension will be secured
Pensions minister, Malcolm Wicks MP, welcomed the industry initiative describing it as providing “a balanced view of the issues involved in home personal finance insurance
out.”
However, Which said that the letter left people “in the dark” about what to do next.
“We believe the situation is so serious that we are calling upon the Financial Services Authority (FSA) to conduct a full market analysis to determine if there has been significant market failure in this area,” Tereza Fritz, Which spokeswoman, said.