Opt in Opt Out SERPS

njdouglas

Hi,

Many years ago when I started work at 17 as an apprentice with a GEC Ferranti, I joined the company pension scheme and at the time was advised to opt out of SERPS and take out an APP pension. This APP (appropriate personal pension) was funded by NI contributions only. After less than two years in the comapny scheme, Ferranti had massive redundancies and I was out of a job. I surrendered the company scheme for cash and the APP was frozen. I then spent two years without a pension before joining the Army in 1994 where I was automatically included in the non contributary Armed forced pension.

13 years later, I'm a civvy again and working as an IT engineer. I currently have no pension scheme as the company one is rubbish and I can't really afford to make any pension contributions at present with a large mortgage and two kids and a wife!

I recently received a yearly statement (which i have always received anyway) from the APP company (norwich union). This statement indicated they had recived a payment from NI towards my pension.

So the question is, am I opted in or out of SERPS and what is the advice now? Do I stay opted out or somehow try and opt back in?

Many Thanks

Neil;

dunstonh

I currently have no pension scheme as the company one is rubbish

Why is it rubbish?

So the question is, am I opted in or out of SERPS

You are contracted out of the second state pension. Unless you contract in or the insurer does it for you then you will remain contracted out. You were only contracted out on paper during your service with the Army as that scheme takes priority over NU. Now you with a new employer and not in the company scheme (not knowing what the scheme is) the NU is reactived.

and what is the advice now? Do I stay opted out or somehow try and opt back in?

Its up to you. You are still under age 43 which is the optimal age to get back into the second state pension. Do the benefits of contracting out appeal to you or do the benefits of contracting in appeal to you?

njdouglas

Hi, Thankyou for the swift reply. In anwser to your comments:

Why is it rubbish?

the company scheme is a stakeholder scheme which my employer makes no contributions to as I believe. I'm led to believe I would be better scouring the market for a personal scheme that would offer better returns. Anyway, I'm not really in a position to make any payments at the moment although after my mortgage renewal in apr 2009 its something I know I must get sorted.

Its up to you. You are still under age 43 which is the optimal age to get back into the second state pension. Do the benefits of contracting out appeal to you or do the benefits of contracting in appeal to you?

As you staed I am under 43. What are the benefits of contracts in or out?

Many Thanks

Neil

dunstonh

the company scheme is a stakeholder scheme which my employer makes no contributions to as I believe.

That does indeed make it rubbish. Employers will be forced to contribute to a scheme from 2012 as long as the employee does as well. So, that is coming.

What are the benefits of contracts in or out?

check out the SERPS/S2P thread at the top. I would suggest working backwards with the newer posts as the rules changed in 2006 and making contracting out more attractive than before. Also the rebates have just gone up for the next few years compared to what they were when Labour reduced them in 97 (stealth tax). However, the whole thing is being abolished in 2012 (ish - final date is not cast in stone yet).

jancee_2

dunstonh wrote: »

You are still under age 43 which is the optimal age to get back into the second state pension.

How does this work please? Why 43?

Thanks in advance.

dunstonh

jancee wrote: »

How does this work please? Why 43?

Thanks in advance.

The rebate that is paid changes with your age. The rebates also change annually. So the age has swung around the 40s over the years and was as high as in your 50s in the Conservative years. Labour reduced the rebates (stealth tax) and made it harder for contracting out to beat contracting in. Although they have recently increased them for younger people but reduced them for older. Currently, 43 for men and 40 for women is the point where it starts becoming hard for contracting out to beat contracting in. Even before that, it is considered cost neutral nowadays.

EdInvestor

It is probably sensible for the OP to do a review of his pensions at this time.

He should

a)Get a forecast of his state pensions from https://www.thepensionservice.gov.uk

b)Find out how much he will be entitled to from the army when he retires (it will be increasing at up to 5% a year to cover inflation)

c)Write to Norwich Union and ask for a transfer value for the pension and also forecasts of its likely value at retirement age. You can then go to the site below choose the "pension annuity" section and fill in the amount to see what income you would get from this pension.

https://www.fsa.gov.uk/tables

What fund(s) is the NU pension invested in?