Norwich Union is proposing to automatically contract thousands of personal pension policyholders back into the state second pension. The company have said that customers who were sold a personal pension directly by one of its advisers, would this summer, be sent a letter telling them that they are proposing to automatically contract them back into the state pension.
Six months ago, the life office wrote to policyholders, advising them to contract back in, but only 20% have done so. Investors will have six weeks to respond to the latest letter, should they want to remain contracted out, or if they wish to have independent advice on this issue. The company believe that changes in the economic environment have eroded the potential financial benefits of contracting out of the state second pension for the vast majority of people.
Norwich Unions decision follows guidelines issued by the Association of British Insurers to members on contracting out of the state system last autumn.
Our view
This is a close call. We understand NU's stance but the danger is who will be to blame if it proves better in the future to have been contracted out.
Learn more about contracting out in our State Pensions Centre.