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Topics: contracting out| Protected Rights| Standard Life| HMRC| commission
Financial advisers will lose out on an estimated £80m worth of commission when the government outlaws contracting out of the state pension into private vehicles in April, Standard Life has said.
In May last year, the government passed legislation ending contracting out into defined contribution pensions.
It announced its intention to pass a similar ban on defined benefit schemes during the budget last year, in order to simplify the state pension system.
According to Standard Life, which based its estimates on HMRC data, the move means some £2bn per year - approximately £1,000 per person with protected rights - will no longer be paid into private pensions from state pensions.
It said this could lead to a total loss of £80m worth of commission advisers currently collect on those contributions.
IFAs will be able to replace the income stream if clients increase their private pension contributions, John Lawson, Standard Life head of pensions policy, said.
"After 30 years of work, you can argue to clients that they get no extra benefit by paying into the state system, so they may wish to increase the amount they pay into their private pension scheme," he added.
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Could you imagine
Re: the unfairness of changing the benefit terms on a contract for the worse in flight (SERPS, S2P etc). ..... .. Could you imagine selling a contract that was retrospectively changed for the worse for a customer, who was never warned at the time of entering the contract it was going to happen and never having received the T&C's in writing from the provider nor contract documents ? ........................................ You wouldn't be allowed to and not expect the case to go to the FOS or the courts under unfair terms for starters, so why are state schemes different ? Trouble is, it seems unless we all go out on strike it's assumed we agree... the public don't have a Union and individual voices become lost.
Posted by: Joe Public
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contracting-out ban
Forget the commission. The fact is that the State pension scheme is the unfairest scheme of all pension schemes if you are a hard-working, tax-paying, middle income (or above) citizen. Its a great scheme for unmarried mothers who live on benefits for most of their adult lives, or for immigrants who stay at home with their children or take part-time jobs earning £6,000pa. It's not bad for low earners generally but for people who have worked 49 years paying tax on above-average earnings most of that time, or for the self-employed with decent earnings, the State pension is a total rip-off. And, of course, SERPS (and the State Second Pension as it is now called) is another tier of rip-off for above-average earners. One has to ask why the rules are being changed. You'd have to be pretty thick not to be able to guess the reason - the government makes a fat profit overall from its deductions from employed people earning decent salaries, some of which it uses to subsidize the retirement years of the feckless, the lazy, the under-achievers and the undeserving.
Posted by: Bill Wells