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Ritchie warns investors of contracting-out &#39minefield&#39

Scottish Equitable pension guru Stewart Ritchie is warning investors they

could lose out financially because of the complexity surrounding

contracting out of Serps.

Writing in the latest edition of the Ritchie Papers, the pension

development director warns of the disparity between contracted-out rebates

on occupational stakeholder schemes and those available on personal pension

stakeholder.

He says: “Rebates on occupational stakeholder will be significantly less

than those on personal pension stakeholder. The difference can be up to 1.6

per cent of the middle-band earnings, which for someone earning above the

upper earnings limit of £27,820 equates to £389 each year.”

On a wider front, Ritchie believes the different approaches the Government

has taken to contracting out under the state second pension, which replaces

Serps in April 2002, could influence which route an employer chooses to

take when making provision for its employees.

He says the complexity under occupational schemes is likely to push

employers down the simpler personal pension route.

Ritchie says: “Contracting out has always been a complicated issue and the

Government is making it even more so with the advent of S2P.

“Not only will individuals continue to need ongoing expert advice on

whether or not to be contracted out but employers will also need guidance

through the minefield, with different issues depending on the form their

pension provision takes. Is it really a sensible topic to try and build

into a decision tree?”

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