Pension opt-outs 'not mis-sold' by Finance News Bulletin

Published: 07/12/07

There is no evidence of extensive mis-selling of policies used to opt out of the State Second retirement fund (S2P), says the Financial Services Authority (FSA)Since early 2005, the watchdog has been investigating the sale of these polices, recognized as Appropriate individual Pensions (APPs)That year it concluded that many of the "contracted-out" savers had made the incorrect decision to buy an APPThe opportunity for populace to leave the S2P, and its precursor Serps, was a flagship policy of the Conservative government in the not on time 1980s and early 1990s, which wanted to encourage private retirement fund saving

In exchange for opting out of the S2P, the government pays part of a person's nationwide Insurance (NI) aid into an APP, which is then invested to build up a bump sum for retirementOf the eight million APPs sold since they were first made available in 1988, about 120,000 (15%) were bought by populace who, in theory, should have been too old to benefitHowever, the FSA has concluded that even though some of them may have been wrongly advised to choose out of the S2P, they may still have had valid reasons for responsibility so

"Some consumers may have wanted the alternative to leave their pension savings to their dependants if they died before retirement," said the FSAThe FSA is correct to look at this issue firm by firm through the normal and effective decision-making process"Or they may have preferred manage over their investments rather than relying on administration pension policy""Individual companies themselves set 'pivotal ages' as a guide for customers and advisers on whether people would advantage from contracting out," said Stephen Haddrill, the ABI's manager general"The FSA is right to seem at this issue firm by firm through the usual and effective supervisory process," he added

In imposing 2005 the FSA itself warned that "contracted-out" savers were likely to take delivery of £4 a week less in pension than someone who had never opted outLater that day, the country's biggest cover company, the Prudential, wrote to 440,000 customers with APPs, advising them to opt back into the S2PIt warned that their NI rebates were no longer large enough to compensate for the investment danger they were taking on by holding a private pensionThe latest recommendation to the FSA from its own outside consultants is that since 2005, the relative position of APPs has improved

But those big savers who contracted out are still looking at a possible shortfall of £7 a weekThe FSA will be publishing a direct later in May for those who still feel they may have been mis-sold an APPAnnuity improvement Women 1 Women 2 Pension rights Divorce labor pensions Lump sums Pension Credit Frozen pensions Shortfalls abroad pension Small pensions Tax and pensions Pension repair Made simpleState pension With-profits Final salary cash purchase Annuities Serps State

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