Once again, we are going to enter a period of uncertainty while regulators decide whether or not wholesale misselling has taken place. What has changed since1997 to make a review necessary now?What will be the focus of this review and what questions will the regulator seek answers for? Our PI underwriters will once again react like headless chickens, even though most potential losses will be well within current excess levels, by either excluding cover or increasing premiums. The review will probably focus on whether investment underperformance risk was properly explained. This will ignore political issues and the unforecasted increase in longevity. Current NI rebates do not reflect current benefit costs and on this basis, all providers should cease providing contracting- out facilities but people do contract out for other reasons. Contracting back in means you are relying on a future Government (remember politicians) to keep promises it never made to you. Two of the major parties want to end means testing by improving the flat rate old-age pension, probably at the expense of the state second pension in some form. Also, from next April, it looks likely that contracted-out funds will be able to provide additional tax-free cash – most people’s favourite benefit. These two reasons alone would probably convince a majority of people to contact out. Remember, most people make decisions based on emotions, not mathematics. Yes, explaining invest-ment risk is important but it should not be looked at in isolation. Levels of rebate, political factors and benefit changes should be addressed to provide a balanced review. Some chance. Stephen HuttonHaxton Nichols Hutton, Leeds
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