serps- pension compensation

Hi, we have had a call from a company called 'Adams Stanley & Ingram limited telling us my wife was wrongly told to contract out of serps .

Ask yourself how they can tell you that when they know nothing about your circumstances?

They have virtually said we have no risk at claiming back compensation of about £600-£800 a year x 14 years .

The last research showed that around 1/3rd of people who contracted out were financially better off for doing so and the average figure for those worse off was around £2-£4 a week. That was back in 2005 and of course the stockmarket has recovered a lot since then.

In 1996, everyone contracted out was better off. In 2002, virtually everyone was worse off. in 2005 is was back to a third being better off. A very rough guess now would be 50% better off. Hopefully, figures will be published later in the year from the FSA when they finalise their report.

then they explained they wanted £495.00 up front and a further 15% once completed for fees ,although this is all very tempting we explained we couldn’t afford to take the risk and lose the £495.00 .

So, it its no risk, why do they want £495 up front?

They have now said they are prepared to take the case on and charge us at the end .We are both very confused as to what to do ,as it seems to good to be true ,on one hand we don’t want to get ripped off by the tune of £495.00 but on the other, are we missing the opportunity of potentially £11.000 - fees ?

Lets just say for the moment that you are in the minority that gets redress and lets use their figure of £11k. Pension redress typically gets paid into a pension. Not your pocket. So you will never see £11k. That means you will have to pay that £15% (plus VAT) out of your own pocket. Thats a bill of £1650 plus £288.75 VAT.

Would really appreciate some thoughts on this from other money savers .many thanks

Contracting out is not a mis-sale. The advice on how and whether to do it could be. A number of these dodgy claims companies (of which DOTWs is not one) assume it is. They also exaggerate the amounts you are likely to be worse off by, the amounts you will likely get and how you have to pay them.

At present the FSA is conducting a review and has reported that there is no evidence of wholesale mis-selling (such as endowments). It has identified around 200,000 people who contracted out outside of the typical ages where it was best to do so. It is currently in discussion with the providers on how to deal with these. It is expected that the providers/advice companies will be told to review these cases. This can be done as they 200,000 can be identified. It wont need people to complain.

At this time the providers are also in discussions on how redress would be paid and we have heard that they are pushing for those with upheld complaints not to get any of the benefits from contracting out. In other words, if someone complains that they should not be contracted out and the complaint is upheld, then they will only get the benefits from being contracted in. Not those that are only available from contracted out. This would mean no 25% lump sum on the value. No ability to take the pension before state retirement age. No surplus amount if the contracted out funds return to surplus and the difference in death benefits. Whether the providers get this or not we dont know at this time.

The other point they are pushing for is that for the last 3-5 years, providers have been writing to those contracted out giving them the chance to contract in if they wish. Therefore if someone chooses to remain contracted out after they started writing to them, then that period shouldnt be taken into account in any complaint as that person has chosen to remain contracted out. This is quite important as its only the Labour years where contracting out has been harder to justify as Labour have been reducing the rebates (stealth tax). The Conservative years had higher rebates and bonuses to begin with. It was a no brainer to contract out in the Conservative years if you fell within the age groups.

I would wait until the review is complete from the FSA before deciding. It may also be an idea to get an IFA to review your pension. Pre 2001 pensions can often be osbolete by todays standards (many are not so it isnt an assumption you can make automatically). They can also discuss contracting out and unlike that claims company, they are authorised and regulated to do so.