View more on these topics

Life offices face pension perils in contracting clients into S2P

A leading pension adviser is warning that significant numbers of investors who are being arbitrarily contracted back into the state second pension by life offices could be worse off than if they stayed contracted out.

Richard Jacobs Pensions & Trustees director Richard Jacobs says some of his clients are far better off contracting out. A number of life offices, including Axa and HSBC Life, have unilaterally contracted back in their contracted-out scheme members.

But the move could result in future misselling claims, warns Jacobs. He says one of his clients, a man aged 42 investing his pension in Legal & General’s with-profits fund, would be 50 per cent better off contracted out even if a conservative assumed growth rate of 3 per cent after charges is applied to his pension pot.

By retirement, the client would be losing 914 a year by being contracted out, according to Government calculations. If the National Insurance rebates achieve the assumed growth rate, this would be worth 1,536.

Jacobs says: “Insurance companies are saying you are better off contracting back in but the worry is that clients will be worse off and will be coming back asking why they were contracted back in. The insurers are frightened to death because of the regulators.”

An FSA spokeswoman says: “There is no concrete evidence of misselling around either contracting in or out.”

Recommended

Question time on exam cash

What has been gained by amalgamating the LIA with Sofa and producing something called the Personal Finance Society? The answer is, more money for the CII.

Budget date announced

The Treasury has announced that Gordon Brown will deliver his Budget on March 16. It is likely to be the last Budget before the General Election.

Product Matters

The latest capital-protectedcomes from Clerical Medical in the shape of the secure investment plan. To all intents and purposes, it is an open-ended structured product with a five-and a-half-year term with the capital guarantee at maturity.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com