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Which? alert over contract-out sites

Which? has raised concerns that websites which encourage consumers to contract out of the second state pension could mislead consumers into believing they could get a better deal by doing this and has referred two sites to the FSA.

Which? says research it conducted in 2005 found that almost two-thirds of people who had contracted out of S2P were worse off than they would have been by staying in.

The websites called and are owned and run by 1st Contact Financial Services and say that if you are below the age of 40 or a foreign citizen not intending to retire in the UK, you generally benefit from contracting out.

The website says that if you choose to contract out, then your rebates will be put into an Axa stakeholder pension scheme.

1st Contact says it is acting as an introducer and is taking commission from Axa for the business but Axa says it does not endorse these websites.

Hargreaves Lansdown head of pensions research Tom McPhail says: “I am wary of anybody that peddles certainty in this area because you do not know what the outcomes will be until decades hence. Our default position is that you should be contracted in.”

1st Contact Financial Services director Andrew Frank says: “Most people do not know that they have the ability to contract out. It is not widely publicised by the Government and advisers are not interested in doing this business because they are not going to make any money out of it.

“We clearly state on the website that it is not advised. We deliberately kept it conservative and low key.”

The FSA says it cannot comment on individual cases.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Which? was previosly known as the Consumers Association, can it deny that it ever encouraged people to contract out? Articles soon to be posted on

    For the record, the only person I contracted out was me, I regret doing so and my pain is increased as I chose Standard Life who used LAUTRO assumed expenses in the illustration of future benefits and now pillage the with profits fund. I suppose I should be graeful that I did receive some shares for my trouble.

    What a mug.

  2. As long as individual impartial advice is given, contracting out still has a relevant place, if the client wants to retire before 65 (66?), they want to receive tax free cash or would rather take more control of the money than see if added to the state pension.

  3. Anyone who is promoting contracting out now, should be censured. It is clear that the case for contracting out has gone, especially as the Givernment intends for this option to cease in the near future.

  4. Their was an article in the Saturday Telegraph dated the 10th October and written by Ian Cowie. In it he was talking about not being able to rely on State Pension due to the moving goalposts. In it he states “When I opted out of SERPS more than 20 years ago, I did so on the basis that I would rather build up a pot of private property than rely on an ill-defined share of an unfunded scheme. That remains as true now as it was then.”

    One size does not fit all and therefore advice should be tailored to the individual rather than being generalised.

  5. David Trenner - Intelligent Pensions 26th October 2009 at 5:56 pm

    These people contacted me on my personal email. When I reported them to the FSA they simply said that the firm had not broken any rules.

    Those who know me will be aware that I passed 40 some time ago. Those who do not know me should not try to sell me pensions!!

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