Should higher earners now contract out from S2P?

mr_fishbulb

As it will be capped, is it now best for higher earners to contract out of the State Second Pension? Or isn't it as simple as that?

EdInvestor

The plan is to abolish contracting out in 2012 so if you are already contracted out, you may as well keep collecting the free money until then IMHO.

But make sure the rebate money is going into is a modern pension with low charges and decent funds.Otherwise even the capped S2P will be hard to beat - it will cost you about 75k to buy on the annuity market (the basic state pension costs 100k at present and of course will get much more expensive later when it starts to rise with earnings).

mr_fishbulb

Cheers. So if I contract out now all my previous NI contributions to the S2P will be put into whatever pension I chose and then any contributions put in yearly until 2012? I'm just starting a new job so I'm waiting to see what their scheme is like.

I guess I need to see an IFA as both myself and my girlfriend are starting new jobs so we need someone to look at the pensions offered.

duckhunter

No you just get this tax years contributions and future ones. Any contibutions you;ve made in the past will go towards giving you an entitlement to s2p at retirement

Jays

My husband has just contracted back in, as he is a higher rate tax payer, should he look at contracting out again?

Any advice gratefully received.
Jays

dunstonh

Jays wrote:

My husband has just contracted back in, as he is a higher rate tax payer, should he look at contracting out again?

Any advice gratefully received.
Jays

take a look at the last few posts on this thread http://forums.moneysavingexpert.com/showthread.html?t=204389

and look at the last page or two of the contracting out sticking thread.

There are pros and cons to contracting out and everyone is different.

redzak

mr_fishbulb wrote:

As it will be capped, is it now best for higher earners to contract out of the State Second Pension? Or isn't it as simple as that?

In a word...NO.

Under 35's may still slightly beenfit from being contracted out but the rebates are jst not worth it. Much better to contract back in and build an S2P allowance.................anf cross your fingers the governmet stil commit to paying it when you retire.

dunstonh

Much better to contract back in and build an S2P allowance.................anf cross your fingers the governmet stil commit to paying it when you retire.

In your opinion and based on your circumstances....