NPI is recommending that all its with-profits policyholders stop making contractedout payments into the fund because it is unlikely to outperform the state scheme.
A letter to clients seen by Money Marketing gives three options, none of which involve remaining in the NPI with-profits fund. They are redirecting future National Insurance contribution payments to other NPI unit-linked funds, going to another pension provider or contracting back into the state system.
NPI says it is not appropriate to give pivotal ages for contracting out for policyholders invested in its with-profits funds because it is largely invested in gilts and therefore unlikely to outperform the state second pension.
Pearl customers will be automatically contracted back in to the state scheme although NPI with-profits policyholders will stay contracted out if they fail to respond to the provider.
NPI spokeswoman Karen Smith says: “We are suggesting that policyholders get advice because we do not expect the fund to give a better return than the alternatives. But if customers do not get back to us, they will stay where they are.”
New Life Financial Planning principal John Burnard says: “This move concerns me as to whether it is a further indication as to how tight things are. We are advising people to move their funds out of NPI.”
Central Financial Planning director Ian Smith says: “It is strange to see a provider trying to switch off the supply of money but it will give advisers an opportunity to talk about contracting out to their clients.”