New rebates will have a limiting effect on the number of people in the UK who choose to contract-out of the state earnings related pensions scheme (SERPS) and the state second pensions (S2P) scheme, according to Scottish Equitable.
Stewart Ritchie pensions development director at Scottish Equitable believes the lack of financial incentive, brought about by the new rebates, will probably complicate the contracting out decision. He stated that the decision is focussed on whether it is better to take the rebate currently on offer and invest it privately, or rely on the State to honour its promises at a future date.
Ritchie said: “The contracting-out arguments are extremely complex, and the new rebate levels have made the position worse, not better. With no clear financial advantage to support contracting out, individuals, employers and trustees will be turning to IFAs to help them make informed decisions on whether or not to contract out.”
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