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13/03/2002
Insurers issue warning over pensions options
The issue of pensions has become ever more confusing following recommendations from several leading insurers which urges people approaching retirement age to reconsider re-entering Serps.
Several insurers – including Equitable Life, Legal and General and Prudential – are now advising men aged 54 and women aged 49 to rejoin Serps (the State Earnings Related Pension Scheme) as it is no longer worth their while to opt out and to receive National Insurance rebates instead.
The recommendation comes after an increasing number of companies are choosing to end their final salary pension schemes to both new and existing employees, with private plans such as stakeholder pensions offered in their stead.
This is in line with government's wish to decrease reliance on the state pension, which currently exists in two forms – the basic state pension, and the earning-related top-up scheme, Serps.
However, it has been calculated that around 12 million people are losing out by continuing to ignore Serps, having followed the government's encouragement to opt out, and in place receive rebates on National Insurance Contributions – money which is then deducted from the salary and invested in the individual's private pension plan.
Up until now, the benefits given by these rebates have been generous enough to have been worthwhile for many workers.
However, on April 6 2002, Serps will be replaced by a new system, to be known as the State Second pension (SSP) which is designed to ensure a better state pension for the less well-off – and this will impact upon the rebates to the point where the rewards of opting out will be negligible.
(CL)
Several insurers – including Equitable Life, Legal and General and Prudential – are now advising men aged 54 and women aged 49 to rejoin Serps (the State Earnings Related Pension Scheme) as it is no longer worth their while to opt out and to receive National Insurance rebates instead.
The recommendation comes after an increasing number of companies are choosing to end their final salary pension schemes to both new and existing employees, with private plans such as stakeholder pensions offered in their stead.
This is in line with government's wish to decrease reliance on the state pension, which currently exists in two forms – the basic state pension, and the earning-related top-up scheme, Serps.
However, it has been calculated that around 12 million people are losing out by continuing to ignore Serps, having followed the government's encouragement to opt out, and in place receive rebates on National Insurance Contributions – money which is then deducted from the salary and invested in the individual's private pension plan.
Up until now, the benefits given by these rebates have been generous enough to have been worthwhile for many workers.
However, on April 6 2002, Serps will be replaced by a new system, to be known as the State Second pension (SSP) which is designed to ensure a better state pension for the less well-off – and this will impact upon the rebates to the point where the rewards of opting out will be negligible.
(CL)
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