Serps Sp2

engineer398

Hello.
I'm a mid 20's guy who opted out of SP2 2 yrs ago. Not sure if it was the correct move, but i did it.

Can someone explain to me in simple english, if it's a good idea to opt In / Out of SP2.
Do take into consideration my age (24). Will their be a State pension when i retire?
I've read on some threads that what you pay into your pension, you will get back, but is that Opt In / Out?

Would the Government really stop a pension? Maybe i choose the wrong option, maybe i should of Opt In? What money have i losed / gained?

Can i ring my private pension and Opt back In?

Paul

dunstonh

Can someone explain to me in simple english, if it's a good idea to opt In / Out of SP2.

Not possible Contracting in/out is not the easist subject and the pros and cons are subjective.

However, the basics are:

You give up qualification for the second state pension in exchange for building your own pot which you have control over. Its done on a year by year basis so you will end up with some contracted in and some contracted out.

Contracted out funds can be taken between 55 and 75. Contracted in funds can only be taken at state pension age. Thats 68 for you.

Contracted out funds can pay 25% as tax free cash. Contracted in funds have no cash option.

Contracted out funds are subject to investment returns (so down in the last 12 months for example). Contracted in funds have no investment risk but are subject to legislation risk. The Govt has reduced contracted in benefits 4 times retrospectively so far.

One option is not better than the other as far as provision goes. Whilst there is the potential for more or less with the options they are considered cost neutral.

Death benefits are different.

The Govt can abolish S2P or make changes which will impact on contracted in benefits. They cannot claw back contracted out benefits without primary legislation. That makes it more difficult and the impact on the markets would be significant. The previous changes to contracted in benefits have seen the govt make no attempt to claw back contracted out benefits.

Will their be a State pension when i retire?

Yes. The basic state pension will be there for you from age 68. The second state pension is something I wouldnt bank on.

I've read on some threads that what you pay into your pension, you will get back, but is that Opt In / Out?

Thats your own personal contributions. The more you pay, the more you get back. It is effectly a long term savings plan after all. I doubt many people plan to live on £4700 basic state pension a year.

Would the Government really stop a pension?

There are MPs that want a single state pension. So, yes, its possible the second state pension will go.

Can i ring my private pension and Opt back In?

Yes.

engineer398

thx for your reply

engineer398

Can you confirm to me...

Because i am contracted out, i can claim with Ni's contributions??...or something else.....i might be wrong.??
Im with Legal & General, so i'd have to ring them up??

I also saw a thread saying the rebates the private pensions pay are expected to end around 2012 and you will then be contracted in to the state second pension (S2P, formerly SERPS) automatically.

Paul

EdInvestor

engineer398 wrote: »

I also saw a thread saying the rebates the private pensions pay are expected to end around 2012 and you will then be contracted in to the state second pension (S2P, formerly SERPS) automatically.

For someone of your age who is already contracted out, you may as well keep on collecting the NI rebate payments in your private pension until they are automatically stopped in 2012, IMHO. That way you hedge your bets.