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L and G advise members to "contract-in" to the State Scheme

28 November 2007

Legal & General is writing to 115,000 of its contracted-out personal pension scheme members warning that they could get a "raw deal" if they do not opt back into the State Second Pension (S2P).

Instead of building up pension rights from the State, based on a slice of earnings, people who are contracted-out forego S2P and have National Insurance Contribution rebates/incentives paid into their personal pension instead.

The Government has cut the maximum National Insurance rebate to 7.4% of earnings, down from 10.5% last year. According to Legal & General, this reduction means that savers over the age of 44 won't get enough National Insurance Contributions to compensate for the pension benefits they are giving up under the State.

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