Opting out of Serps - can I reclaim?
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Note: This thread has been resurrected from 2011. It predates the abolition of protected rights, the ability to contract out, before the pension freedoms of 2015 and is from before the single state pension.
The introduction of the pension freedoms and abolition of protected rights mean those that contracted out can get their contracted out part of their fund (former protected rights) by flexi-access drawdown.
The single state pension means that many people can get the full amount of state pension without any deduction from contracting out. So, if you had a £40k former protected rights fund and are on track for the full state pension, then you are £40k better off by being contracted out. If you had remained contracted in, you would still be on track for the full state pension but not have that £40k fundAFAIK most people who contracted out aren't getting full state pensions now, as a contracted out year not only loses you the SERPS top up but also the pensionable year.
That is how it was under the old state pension. Not under the new state pension. Contracted out years can drop off to be replaced with contracted in years.
e.g. working life was 45 years. 8 years of that were contracted out and 37 years were contracted in. As there are 35 years contracted in, the 8 years contracted drop off and do not matter and you will get full state pension.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Didn't the government recently change the rules so that opted out years don't count towards pension entitlement at all? Essentially they have retrospectively increasing the threshold, without giving anyone notice or the ability to reverse their own decisions....
No....AFAIK most people who contracted out aren't getting full state pensions now, as a contracted out year not only loses you the SERPS top up but also the pensionable year. Before 1988 you couldn't contract out unless you were in a defined benefit pension, but after 1988 you could contract out of SERPS but still be relying on the state pension which you may no longer get.
That is not how it works. You contract out of the additional State Pension aka SERPS. That has no effect on someone's entitlement to the Basic State Pension. There are no circumstances in which someone would no longer get the BSP because they contracted out.
The BSP has now been replaced by the New State Pension. I understand that the starting amount for the NSP can be lower because you contracted out. But the NSP is more than the BSP, so your are not losing anything, and by adding further qualifying years you can qualify for the full NSP anyway.0 -
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