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Laying the ground rules for review

Before the proposed review of contracting out of Serps progresses any further, can we have a sensible debate about how contractingout advice is going to be measured? I believe, based on past experience, that any review would probably make the following assumptions:

l That future Governments will never abolish or reduce the state benefits under Serps/S2P.

l That if they do, all expected benefits accrued to the date of the change will be ring fenced or protected. l That the current economic conditions of low inflation/ low interest rates/low invest-ment returns are guaranteed to continue for ever.

If these assumptions are used and turn out to be wrong, millions of policyholders and advisers will have been financially disadvantaged by the exercise. Can we get an assurance from all proposers of this review that they will hold themselves responsible for compensating everyone who might suffer financially if their assumptions turn out to be wrong?

Could we also ask the current government and all other major parties to give categoric assurances that scenarios one and two will never happen? Expecting assumption three to be valid would be highly illogical. Any projections of the potential growth in protected rights funds should take this into account.

Surely we can learn from previous misguided reviews? Can anyone honestly say that the ordinary man or woman in the street is better served by the current state of personal pensions and that no one suffered by being reinstated into a final-salary scheme which subsequently collapsed? Can anyone confirm that employees in general have benefited from the tightening up of the regulations of final-salary schemes? Can anyone prove that the millions of pounds of policyholder reserves handed out to endowment complainants are not having a negative impact on the ability of companies to declare future bonuses?

Surely we cannot be heading for another exercise which will have unforeseen ramifications and is unlikely to serve the greater common good?

Eric Warren

Director, Warren Financial Services, Carluke, Lanarkshire


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