Scottish Life believe that contracting out for occupational pension scheme members could be removed by next year, leaving a £29 billion gap in these types of schemes each year. The provider has said that employers will be forced to put more money into schemes, reduce member benefits and possibly ask staff to contribute more. But the company has warned that employers should be wary of closing down their final salary schemes to new entrants to cut long term costs, as young people in pension schemes help to keep average costs at present levels.
Our view
There will only be a gap where Company Pension Schemes have made 'false' promises to staff by including any 'contracted-out' State National Insurance contributions in their pension scheme benefits to make it look better. Those have included these benefits in their promise may have to make up the shortfall. The pension member will not lose out as they will receive State Second Pension Credits for their National Insurance being contracted back in.
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