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Surge back into Serps is forecast as rebates plunge

Contracting-out rebates are predicted to fall about £1bn short of the value of staying in Serps, driving millions of workers back in to state provision, according to actuaries William M Mercer.

Mercer says the rebate levels for contracting out which are due to come in from April are not high enough to match Serps and estimates the difference to be around £1bn a year.

The company reckons that at least three million people will contract back in to the state.

Senior industry figures are calling on the Government not to wait the statutory five years before revising the rebate levels.

IFAs say they will advise clients to contract back in but expect many will be put off by the uncertainty of future Government provision and will keep their private provision.

Scottish Equitable pensions development director Stewart Ritchie says: “We are going to see a very significant cessation of contracting out in the next year. The Government called the industry&#39s bluff when it set such low levels but the industry was not bluffing. The Government should be prepared to admit that it has got it wrong and act quickly.”

Richard Jacobs Pensions & Trustee Services director Richard Jacobs says: “I will have to tell my clients to contract back in. But none of the state benefits is secure and if they take the political view they may well want to stay where they are.”

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