Last Updated: Sunday, March 06, 2005 01:41 PM

If you have opted out of the State Earnings Related Pension Scheme and so pay lower National Insurance contributions and, in return, a rebate goes into what is called a rebate-only personal pension. The idea is that the money builds up and pays out a bigger pension income than would be on offer from a Serps pension at retirement. The rebate you get depends on age. An 18-year-old will get a maximum rebate of £1,138, while a 50-year-old gets up to £2,474 for the 2001/02 tax year.


You can either go back into Serps for the current and following tax years, or put the money into a new, rebate-only plan with a different pension company. You will need to fill in form APP2 (available from Equitable), that will cancel the money going to Equitable and you should then be able to redirect the contributions elsewhere. Equitable is considering sending out further information to its rebate-only pension customers. However, only money for the 2001/02 and subsequent years can be sent elsewhere.


So although money for the 2000/01 tax year probably won't yet have been paid in to rebate-only plans - since it takes a year to be handed over - it is too late to send it to a different company. A spokesman for the Department for Work and Pensions (DWP) says: 'You don't have the option to redirect last year's rebate. But there is nothing to stop you canceling it from April this year.'

Savers can move their existing Equitable Life rebate-only funds to other providers, at the cost of a further 7.5% penalty on top of the 16% they have already lost.


Information can be obtained from Inland Revenue NI Contributions Office, by calling 0845 9150150 between 8am and 5pm, Monday to Friday.


NB When the state top-up pensions, Serps, was launched in 1978 the government promised that employees in contracted-out company schemes would never receive less than they did from the state, even if their scheme failed. A guaranteed minimum pension (GMP) was introduced to ensure this.

Yet pensions minister Malcolm Wicks said compensation under the FAS would not be made with any relevance to, or as a top-up, to GMPs. He said: “People will receive the percentage of their pension we have indicated up to a cap. That is how their compensation will be calculated.”