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Pru and NU tell policyholders to go back to S2P

Prudential and Norwich Union are telling hundreds of thousands of policyholders they are better off opting back into the state second pension.

Millions of people were told they were better off contracting out of the state second pension in the 1980s and 1990s but a combination of poor stockmarket returns, low interest rates and low returns from annuities have led to providers conceding they could be better off back in the state scheme.

Pru has sent out a total of 500,000 letters to clients while NU has sent 250,000.

Pru is automatically contracting in males aged 60 and over and females aged 54 and over. People below that age range are being advised to review their situation and are being sent the ABI’s factsheet on the issue.

NU is not contracting savers back in but warning clients in the “strongest possible terms” that they are “almost without exception” better off in S2P.

NU head of pensions development Iain Oliver says the group’s belief that the issue is black and white led it to take a stronger than required line in correspondence with policyholders. Given that the vast majority of NU pension business is written through IFAs, Oliver says the life office felt it inappropriate to contract individuals back in automatically.

Pru spokesman Steve Colton says it will begin contracting policyholders back in at the end of February with mailings going out this month and a second batch being sent in January.

Oliver says: “We are strongly recommending that they contract back in and it seems that nearly everyone is better off doing so.”

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