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Standard abandoning break-even ages for contracting back in

Standard Life is scrapping break-even ages as the criteria for deciding whether IFA clients should be advised to contract back in to the state second pension.

The life office says it is adopting critical yields instead. It believes giving a critical yield that investments must achieve to make contracting out worthwhile is a more accurate way of presenting the information to the client.

It says a simple age cutoff point based on age after which everyone should contract back in does not take account of clients&#39 attitude to risk.

Standard is expected to announce its annual contracting-out recommendations at the end of August.

But it says it will not be making a blanket recommendation that everybody should contract back in to the state system, as Axa did in June and HSBC did in March, believing it is IFAs&#39 responsibility to give such advice.

Senior technical manager John Lawson says: “A straight age cut-off is not precise enough. Axa and HSBC have more direct business and so are responsible for the advice but we will not be issuing blanket guidance to contract back in. The ultimate decision is between the IFA and their client.”

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