Contract-out scandalMillions set to lose in pensions scandal
17 August 2005
Millions of people could lose out in the latest billion pound pensions scandal to hit the UK, according to new Which? research.
We've found an estimated 4.5 million people who contracted out of the state second pension (formerly SERPS) into a personal pension look likely to get less than they would have received had they stayed in the scheme.
We've warned the government about the problem and have sent our findings to the Pensions Minister, Stephen Timms, and the Financial Services Authority (FSA).
"The government's saved money, and pension companies have earned billions" says Which? editor, Malcolm Coles.
"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."
Since 1988, the government has handed over �35 billion of taxpayers' money to the pensions industry to invest on behalf of those people who were advised to opt into a personal pension.
Of that £35 billion, around £3 billion has been paid to pension providers and financial advisers in charges.
But a combination of high charges, poor investment performance and a huge abdication of responsibility from the government and the pensions industry has produced yet another pensions scandal.
We've produced an advice sheet which is available at www.which.co.uk/campaigns. It tells you how to find out whether you've lost money, and what to consider when deciding whether to stay contracted out or contract back in.