The decision about whether to contract in or out of the State Second Pension (S2P) remains a complex one. This year, the Association of British Insurers (ABI) and the Association of Independent Financial Advisers (AIFA) will not be producing a consumer factsheet but have given a steer to product providers to issue certain information. As a result we have produced our own information leaflet based on common questions raised by customers last year. The mailing to all contracted-out customers (including Intermediary customers) will take place in January 2007.

What is Standard Life's view?
Our view is the same as last year - customers that are currently contracted-out should now seriously consider going back into S2P.

We believe that customers who stay contracted-out run a significant risk of receiving a lower pension than those who choose to contract back in. Customers who are currently contracted-in should continue to remain in S2P regardless of age, salary and the payment of additional contributions.

How have we reached our view?
The main assumptions used are:

1. There will be no change to either S2P or contracted-out Personal Pensions, which affect those benefits accrued for the 2006/2007 tax year.
2. The policyholder retires at State Pensions Age (SPA). We have allowed for the future equalisation of the pension ages for S2P in our analysis.
3. Standard Life's current charges will continue to retirement.
4. At retirement, an annuity will be purchased on a basis consistent with our current annuity basis.

Some of these assumptions differ from those used by the Government Actuary to calculate the rebates. We have used a consistent pre-retirement investment return but have used our charges and current annuity rates.

Of course, Intermediaries may choose to use their own assumptions and take individual circumstances into account when considering their advice on this issue.

Further information
Copies of the covering letter and our information leaflet will be available on adviserzone in due course.

If you have any further questions please contact your Standard Life office.

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