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No IFA blame for contracting out

IFAs will not be blamed for advising investors to contract out of Serps although an FSA report has found that most people who have contracted out will be worse off.

The average pension loss after contracting out is 4 a week, according to a report commissioned by the FSA.

Even people who contrac-ted out for five years but contracted back in will be 2 a week worse off.

Around three million people are currently contracted out although an estimated eight million have been contracted out at one point or another.

The FSA says this is not evidence of misselling but that the investment risk that people who contracted out took did not pay off and so there are no grounds for complaint.

A report by Which? last week found that the average contracted-out person will be around 800 a year worse off.

Oxford Actuaries and Consultants, which carried out the research for the FSA, stresses that several assumptions had to be made and these, such as annuity rates, future investment returns and retirement ages, could change by the time that people come to retire.

Which? head of campaigns Louise Hanson says: “This new research is certainly cause for alarm for those who have contracted out. People still have the option of contracting back in but they need advice from the Government.”

Central Financial Planning director Ian Smith says: “The alternative is, do you trust the Government to keep paying the rebate? It is a complete crystal ball job.”

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