The Government has missed a golden opportunity to deal with the potential danger of people misbuying stakeholder and contracting out of state pension top-ups, according to pension experts.
The industry was looking for rebate levels on Serps and the future state second pension to be raised to sufficiently generous levels which would effectively make a policyholder's contracting out decision for them.
It is understood that the vast majority of industry responses to the consultation on rebates under Serps and S2P asked the Government to put the rebates at a generous enough level to entice most people to contract out.
Rebates became a contentious topic after the Department of Social Security washed its hands of steering the stakeholder target market through the issue when it decided last year to leave contracting out off decision trees.
The lack of significant change in the rules means there will be no more incentive for people to contract out of the state second pension than there is under the existing Serps.
The document which details the rebate is a “statutory instrument”. This means the core content is generally non-negotiable although minor technical changes are possible. The rebate rules will come into force on April 6.
Clerical Medical pensions strategy manager Nigel Stammers says: “We asked for rebates to be improved so contracting out was a no-brainer. The lack of change means contracting out is still a tricky issue which is not covered by decision trees.”