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Govt must tackle contracting out

Scottish Equitable is calling on the Government to improve contracting-out rebates to make it easier for IFAs to advise their clients.

It argues that since the introduction of the state second pension in April, there is now no clear financial incentive to encourage individuals to contract out of S2P.

The call for an increase follows a poll of 1,300 IFAs carried out by Scottish Equitable at a series of 15 roadshows around the UK in May. When questioned, 90 per cent said it was now less clear how to advise clients on contracting out than it was 12 months ago.

Scottish Equitable will be holding its next series of pension roadshows across the UK in November.

Pensions development director Stewart Ritchie says: “This practical evidence of the problems faced by IFAs echoes the view that we have held for some time. Rather than being a clear-cut financial decision, contracting out has become a philosophical decision of whether the state can be relied upon to honour its promises in the future.

“If the Government is serious about contracting out, then it needs to do something urgently to tackle the contracting-out incentive. If contracting out effectively disappears, then it goes against the Government&#39s stated policy of reducing the burden on the state by reversing the 60:40 balance of public/private pension provision.”

The Bureaux managing director Peter Quinton says: “The Government will not do anything until the outcome of the Inland Revenue review is made known. The Government has put out so many consultations but Scottish Equitable are right to raise this as it is a view that needs to be put forward when they consider all the reviews.”

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