The Association of British Insurers (ABI) has published a position paper on contracting out of the State Second Pension following the reports from the Financial Services Authority (FSA) and Which?.
Accusing both organisations of causing widespread concern about the current system and the choices consumers need to make the ABI says it believes contracting out should be simplified and reformed in order to stimulate private savings and ensure there is a basic level of retirement income for the lowest income groups.
Chris Kennedy, director of life and pensions at the ABI, says: “Used properly, the contracting-out system could have great benefits for consumers and taxpayers. The present situation has come about because the government has reduced the level of contracted-out rebate that is paid into private pension schemes. This has made the decision over whether or not to contract out a very difficult one for individual savers, given the risks associated both with private saving and with staying in the state pension.”
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