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IFAs wary on S2P

The majority of IFAs have advised their clients to contract back into the state second pension but only half will advise new clients on S2P, says Aifa.

The survey of 400 IFAs shows that 81 per cent have advised at least some of their existing clients to contract back in to the state second pension, with 70 per cent saying they have advised some to most of clients to contract back in, but only half of IFAs are advising new clients on contracting-out.

Aifa says contracting-out is a complex issue and IFAs are nervous about approaching it. Over half the IFAs surveyed prefer to talk clients through the pros and cons with the goal of allowing the client to make the final dec- ision themselves while fee-based IFAs are likely to charge more for a firm recommendation rather than just more generic information.

Many adviser companies no longer offer firm advice on contracting out, fearing that any future change in Government policy on the state second pension could leave them liable for advice given on the basis of the current situation.

Aifa deputy director general Fay Goddard says: “In our view, nothing can replace a face-to-face discussion with an IFA on contracting out. There are many issues to take into account before a dec- ision is made and, in order to identify these, an IFA’s expertise is invaluable.”

Hallmark managing director David Holbrook says: “The 81 per cent statistic does not surprise me but the risk elements need to be discussed with a client as fully as poss- ible instead of taking a blanket approach.”

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