The government has decided to abolish contracting out of the State Second Pension (S2P) through money purchase pension schemes. This is likely to happen from 6 April 2012, but it could be later.

Most money purchase pension annual statements contain a Statutory Money Purchase Illustration (SMPI). By law, from 1 September 2009, these will have to assume that protected rights contributions will stop from no later than 2012.

What this means for our customers
For contracted-out plan holders we’ll now assume no more rebates will be payable after 5 April 2012, which may result in lower values for their SMPI retirement fund values and pension in their annual statement compared to previous years’ statements.

This will be a more realistic projection of the future benefits from their policy, and although the values may reduce, it has to be remembered that their overall benefits at retirement could include S2P benefits from the government.