A second chance at Widows

A second chance at Widows

Millions of people risk losing thousands of pounds if they fail to switch their personal pension contributions back into the state second pension, and this week Scottish Widows began moving customers back in.

The life insurer said it will automatically contract back in some of its direct customers unless they actively choose otherwise. It is believed some 70,000 of its 250,000 personal pension customers could be affected. The others bought plans through financial advisers and must make their own decision.

Ian Naismith of Scottish Widows says customers over 50 are worst affected. "We have decided to contract some customers back into S2P without an explicit instruction because we believe the risk of financial loss is becoming increasingly high. The report prepared for the regulator [the FSA] confirmed that contracting-out rebate levels are insufficient, on reasonable assumptions, to match financially the state pension being given up."

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The Financial Services Authority report shows that most people with a personal pension stand to lose out this year and next year if they ignore the warnings.

People who contracted out after 1993 will have lost the most, as will older workers, people on higher incomes (the more you earn, the more you lose), and women.

A report by Which?, formerly the Consumers' Association, showed that since the early 90s, 4.5m savers had lost out by an average of 20%.

The Financial Services Authority has a guide to contracting out at www.fsa.gov.uk/consumer/pdfs/contracting_out.pdf

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