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Second state pensions not mis-sold, says FSA

11 May 2007
A probe into the sales practices of pensions providers selling policies to customers they advised to contract out of state second pensions policies has found no evidence of widespread mis-selling.

The Financial Services Authority (FSA) launched an investigation in 2005 amid concerns that some customers being encouraged to 'contract out' of the state second pension were above the recommended 'pivotal age' for leaving the state second pension scheme.

But the regulator found most customers who were above the average pivotal age were contracting out for reasons of individual circumstance.

However, consumer group Which? believes the FSA should compel pension providers to supply annual statements comparing the value of their clients' contracted-out pensions to the value of the state pension they have given up.

Such a scheme would allow customers to compare directly the relative gains of staying with a second state pension or contracting out to a policy from an independent provider.

Which? claims that many of the 120,000 people whose pensions were under investigation may still have been wrongly advised to contract out.

These customers "could end up incurring a lifetime loss of £780 million", Which? warned.

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