| Norwich Union takes policyholders back to S2P |
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Top insurer, Norwich Union, declared that it was planning to shift several of its pension policyholders again into the state second pension (S2P), in view of the murky future possibilities after retirement.
Norwich arrived at this decision of switching as many as 40,000 of its policyholders to the S2P scheme again, as insecurities regarding the retirement futures of people who had ‘contracted out’ of the state earnings-related pension scheme or ‘Serps’, were mounting. The insurer said that certain economic changes had scoured all benefits of opting out of the state pension’s scheme.
S2P had succeeded Serps in 2002 and aimed at low and middle income groups. ‘Contracting Out’ implied that people gave up some or all of their Serps endowments and invested privately in a separate scheme. If the workers opted out through a personal pension, then they would be entitled to receive some National Insurance contributions as government rebates, which would be paid into their pension plans.
Therefore, the concept of the ‘contracting out’ scheme was that the investment in the private pension scheme would augment with time and furnish greater and improved benefits at retirement than the state pension scheme. Nevertheless, the recent stock market dives and a downturn in annuity rates had demolished all such possibilities and the insurer realized that falling back to the state pension scheme was a much safer option for policyholders.
However, policyholders who had contracted out, a meager 20% responded to the insurer’s letters that were sent as intimations of the idea. Mike Kirsch, operations director at Norwich Union said, “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 and take the responsible approach for our policyholders.”
Policyholders with pension policies directly with the Norwich Union as well as those customers who had no advisers registered to their policies, would be automatically switched back to the S2P. In case they didn’t want to come back, policyholders could contact the insurer in that case.
Meanwhile, the company has requested its remaining customers to seek financial advice regarding the matter.
Posted
on : Thu, 19 May 2005 06:45 GMT | Pensions News
By : Chris Rowe
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