The insurer Norwich Union is to transfer 40,000 policyholders back into the state second pension (S2P) automatically, it announced yesterday.
NU, one of Britain's biggest private pension providers, said it no longer believed that contracting out of S2P, which replaced Serps last year, made financial sense for the vast majority of customers.
Last year, the insurer wrote to 270,000 stakeholder and personal pension customers warning of its concerns about S2P. It said the national insurance rebates paid by the Government to savers who contract out of S2P were now much less generous than in the past. As a result, savers must earn much higher investment returns on the money to get a better pension in retirement than they would be due under the state scheme.
NU said yesterday just one-fifth of customers had replied to the warning. Its operations director, Mike Kirsch, said: "The next logical step is automatically to switch these customers back into S2P and take the responsible approach."
The insurer said it would only take the step on behalf of 40,000 policyholders who have bought pensions directly from it. It urged customers who have opened NU pensions through financial advisers to seek guidance. Customers will be entitled to insist they remain contracted out.
NU follows HSBC bank in automatically contracting customers back into S2P.Reuse content