Pension firms say: Go back into Serps
LEADING pension providers have written to thousands of customers who opted out of Serps urging them to rejoin the second State pension. In a blow to the Government's pensions strategy, Legal and General, Prudential, Standard Life and Equitable Life recommend that people in their fifties and sixties should go back into the new top-up pension scheme, which replaces the old Serps from April.
People get a Government rebate, effectively a refund of National Insurance contributions, if they opt out. But actuaries are concerned that it is not enough to compensate for giving up the top-up pension, even when the money is invested in a private scheme.
Although the rebate is set to rise when the second state pension replaces Serps, it is still not thought to be enough to cover the shortfall because of increased longevity and falling stock market expectations.
About 12m people in total are thought to be affected. Most of those contacted by the pensions providers are expected to follow the advice, which comes on the eve of the National Association of Pension Funds' annual conference in Edinburgh today.
Attention on the looming crisis has been sharpened by the closure of final-salary pension schemes at dozens of companies across the country. A mass move back into the second State scheme would threaten the Government's desire to shift the burden of retirement provision from the state to the private sector. It wants to increase the level of privately-funded pensions from 40% to 60%.
