05 December 2006
Despite being informed that they would be better off if they
contracted back in, more than four in five of Legal & General's
pension savers have decided to remain contracted out of the State
Second Pension (S2P).
Legal & General wrote to its personal and group pension
customers earlier this year urging them to consider contracting
back in, as the National Insurance rebates paid to those who opt
out are no longer generous enough to ensure that they produce a
better pension income outside of the S2P.
83% of those who have responded to the letter have specifically
asked to remain contracted out. Tom McPhail, head of pensions
research at Hargreaves Lansdown , explained that many people
preferred to remain contracted out as they fear that future cuts to
S2P by this Government or its successors would reduce the value of
their final pension. Mr McPhail remarked: "If you just look at the
numbers, then most people should be contracted back in. But there
are other factors and these clearly have influenced investors'
decision-making. These include retiring early, taking tax-free
cash, and the simple appeal of having direct control over your own
pension fund rather than having to trust the Government not to
fiddle with what's on offer."
