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Webb claims contracting-out ‘fiasco’

The Government is aware of 133,000 people over the age of 53 who are losing out because they have contracted out of the second state pension, according to the Liberal Democrats.

Research from the House of Commons library estimates that these people could be 4,000 worse off, with the Government saving over 500m through their failure to opt back into the state system.

In answer to a query from LibDem Shadow Work and Pensions Secretary Steve Webb, pensions minister Malcolm Wicks has said people over the age of 53 would be better off contracting back in.

Webb says the Government should be contacting these people directly to make them aware of the money they are losing instead of relying on pension companies to do it.

The Commons library estimates that people in this age bracket are losing out on 4 a week through contracting out. This could lead to a loss of 4,000 over 20 years.

Webb says: “The Government is profiting on a massive scale. This whole fiasco is a further reason for paying one decent state pension as of right.”

A Department for Work and Pensions spokesman says: “Under the FSMA, we are not allowed to offer advice in the way Steve Webb wants but people do need to get sound advice over this issue.”

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