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Press Release

A missed opportunity amounting to £780 million

09 May 2007

In response to today’s announcement by the Financial Services Authority (FSA) on contracting out of the second state pension (S2P), Teresa Fritz, principal researcher, Which?, says:

“The FSA has missed a golden opportunity here to help consumers. The 120,000 people identified by the FSA, who may have been wrongly advised to contract out of the second state pension, could end up incurring a combined lifetime loss of £780 million.

“But this is just the tip of the iceberg, as we have calculated that the total number of people affected could be up to 4.5 million. Pensions could be seriously under funded without people even realising it.

“Since 2005, Which? has been asking the FSA to make pension providers supply annual statements comparing the value of their clients' contracted-out pensions to the value of the state pension given up. This is the least the industry can do given the millions it has earned in commission from contracting out.

“We will be requesting an urgent meeting with the FSA and the Department for Work and Pensions to discuss how to help consumers understand if they have suffered a loss.”

People who have been advised in the past to contract out of the state second pension should contact their pension provider and ask for a personalised statement. This should compare the projected income from their contracted-out personal pension with the amount they would have received from the State.



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