Norwich Union to contract in pensions customers

Norwich Union to contract in pensions customers

The move affects those who were originally sold their pension by a Norwich Union adviser and those who no longer have an adviser registered on their policy.

Norwich Union believes changes in the economic environment over the past few years have eroded the potential financial benefits of being contracted out of the scheme for the vast majority of people, regardless of their age.

Six months ago the insurer wrote to policyholders urging them to contract back in. Only 20% of the 253,000 customers contacted responded, leading the company to decide on an automatic opt-in.

However, customers who do wish to remain contracted out can still do so.

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Letters will be sent out to the effected pension holders during the summer, informing them of the change. They will be given six weeks to respond should they wish not to contract back in, or to take financial advice on what to do next.

"We are disappointed that only 20% of the customers we mailed over six months ago have responded on this important issue," said Mike Kirsch, operations director at Norwich Union.

"Our research shows that nearly 60% of customers are still undecided or are simply avoiding making a decision on this despite receiving our clear communication outlining Norwich Union's recommendation to rejoin the state scheme.

"We are concerned about the high levels of customer inertia on issues such as this and believe that the next logical step is to automatically switch these customers back into the state second pension, taking the responsible approach for our policyholders."

The state second pension is an additional pension aimed at low and middle earners and based on national insurance contributions that are paid or treated as being paid, for example by people caring for elderly relatives or children.

Policyholders who contract out receive an annual rebate of national insurance contributions, which are paid into their pension scheme.

The rebate is intended to provide benefits broadly the same as the additional state pension that people have given up. However, when pension investments are performing well, the benefits can be greater.

The government's Pension Service offers information to help you make a choice about contracting out on its website, www.thepensionservice.gov.uk