AXA has called on the Government to increase National Insurance rebates for the current tax year bec...
AXA has called on the Government to increase National Insurance rebates for the current tax year because it believes that otherwise people will begin contracting back into the State scheme in huge numbers as the current rebate levels make contracting out unsustainable.
Steve Folkard, head of pensions marketing says, 'our analysis of the level of rebates suggests that, at current levels, no-one should contract-out. In fact, our analysis shows that, unless the levels of rebate are increased, anyone who is currently contracted-out should contract back in.'
AXA says it has changed its view because the underlying annuity assumptions have changed. This means that it has to make a more prudent allowance for the cost of annuities in the future because improvements in mortality means longer life expectancy. The result is that the benefits that may be provided by a personal pension, using the current level of rebates, would be less than those provided by the State scheme.
The example it cites is a 30-year-old man on average earnings who in the current tax year might expect a contracted-out pension 14% less than the State would provide.
Steve Folkard goes on to say, 'this is a complex area of pensions with advisers and the public looking to pension experts for guidance. Our analysis suggests that rebates need to be increased to maintain the viability of contracting-out. Therefore the conclusion is that the Government needs to make the required changes for the current tax year, and beyond, or there will be a mass migration back into the State Scheme.
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