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Emerging Risks Blog
SERPS mis-selling


Patrick Kelliher

In recent weeks, ads for a SERPS misselling claims company have popped up frequently on my Facebook page [1]. Not content with mortgage endowment and PPI misselling, ambulance chasers are also looking at contacting-out sales as a source of claims and fee income. Just how serious a threat is this ?

At the heart of the misselling claims are appropriate personal pensions (APPs) used to contract out of SERPS [2]. The government paid National Insurance rebates into the APP but in return, a deduction would be made from SERPS benefits in respect of the period contracted out. When contracting out through APPs was introduced in 1988, the rebate did not vary by age, whereas the value of SERPS benefits foregone increases with age, so contracting out was generally expected to be beneficial for younger people below a “pivotal age”. Although rebates were then changed to be age related, the expectation, based on assumptions for investment returns and life expectancy, remained that...

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