Change in law for millions of pension holders
New legislation is being introduced today (October 1) giving millions of people with private pensions greater freedom to invest their money where they choose.
Over the years, eight million have opted out of a State second pension (SERPS). This is the second part of the state pension into which our national insurance contributions are made. The technical name for this is protected rights.
Malcolm Cuthbert, partner in investment strategists Killik & Co, said: “Previously the Department of Work and Pensions (DWP) took the view that if people wanted to invest their second State pension themselves, by contracting out of it and holding their money in protected rights funds, then no great risk should be taken with that money. The Government therefore dictated the money could only be invested in funds held by insurance companies.
“It is estimated that there is between £70bn and £100bn currently in protected rights schemes. Now that the government has decided to change the rules, individuals will have a greater choice of where to invest, many of which will have a higher risk profile and potentially yield greater return such as commercial property, the stock market or unit or investment trusts, debentures and warrants.”
Research commissioned by Killik & Co on the eve of the law change has shown that 50% of the UK’s pension holders never check the performance of their pensions. Six out of 10 admit that they don’t know how much their pension funds are worth, and 78% say they have no pension strategy at all.
Follow a live webchat about what the legislation change means for you on October 1 at 5pm, by clicking here.