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Providers &#39profit from client inertia&#39 on Serps

Product providers are profiting from client inertia by leaving them with contracted-out protected rights from Serps on pre-stakeholder terms, says Millfield pension specialist Graham Duckett.

He says AMP is keeping old clients on stand-alone contracted-out rebate pension terms that have a 5 per cent up front charge as well as a 96 per cent allocation rate.

However, new clients will only face a 96 per cent allocation on the first £500 of their premium, with a 1 per cent charge thereafter.

Existing clients on Allied Dunbar&#39s protected rights product are charged 5 per cent bid/offer spread on top of a 94-96 per cent allocation and a 0.75 per cent annual management charge.

Duckett says these providers should follow the lead set by companies such as Standard Life which automatically moved all clients on to the cheaper plans.

Duckett says the age-related basis of state second pension means many people who contracted out years ago when rebates were more generous could be better off contracted in.

He also argues that the Government has not done enough to inform the public of the change in their contracted-out rights following the change from Serps to S2P.

Duckett says: “People do not perceive contracted-out rebates as their own money so they are not so bothered about it and some providers are playing on that apathy.

“Everyone should be checking their accumulated funds are on the best terms and also consider whether they should be contracted out at all.”

AMP press officer David Gwyer says: “People who are on the old contracts at higher rates will remain on them unless their advisers move them over. We are happy to move them over to the modern contracts but our view is the decision has to come from the IFA and not us.”

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