New pensions scandal over contracting out

19 August 2005
Millions of people advised to opt-out of the state second pension (SERPS) will lose out financially according to new figures obtained by consumer group Which?

It claims that 4.5 million people who took out a personal pension will get around 20 per cent less than if they stayed in the state scheme.

Which? is accusing the government of a "huge abdication of responsibility" and is calling for pensions minister Stephen Timms to respond and issue clear guidance.

According to Which?'s figures, based on an analysis of 108 of its staff and readers, 71 per cent of those who contacted out will get a lower pension than if they had stayed in the state system.

And even the savviest have been caught out. Malcolm Coles who edits Which? said that he is set to lose £800 a year from contracting out. He said: "Contracting out has been one of the worst financial decisions I've ever made".

Mr Coles added: "The government's saved money, and pension companies have earned billions - the only losers are people who did as they were advised.

"Given the government's stated concern over the so-called pensions' saving gap, it's high-time it gave us some clear direction on opting out, before millions lose out."

To read more about pensions, click here.

track© Adfero Ltd