Serps confusion connundrum!

bobi22

Way way back in 1989 I went to an independant financial advisor & was advised that "the new big thing" was to opt out of Serps. This was apparently (as far as I remember) because the government were "giving away" a couple of extra percent tax relief to encourage people to do this. I was told that until I was "about" 40 I would be better off and that after age 40 I should think about opting back in.

My insurance company NPI seemed kosher & everything appeared above board.I would just get a letter once a year with a new balance ( but I never really looked at these statements as retirement seemed so, so, far away!

At the beginning of this year I received a letter from NPI stating that they were pulling out of Serps & the fund was to be closed. I assumed that I would automatically be opted back in, but i'm not really sure?

I was starting to get a bit concerned and was about to start looking for some independant financial advice (trouble is I am very wary of "independant financial advice" - but that is a whole new story!) and was about to embark on finding a reputable firm when :-
Very recently I was cold called by a firm of IF Advisors, who (obviously got my name off some serps register?) advised that I may have been miss sold the serps contract & should embark on a compensation claim.

I have to say that they appear all above board,
I looked on their website.
They have been upfront about any charges I may incurr. ie. They would charge 11% (+vat) of any compensation I may be due & that this compensation could be in the region of £1000/year in the scheme!!!

Since talking to them I looked around on the net & all (the few) companies that I found that do a similar job seem to charge between 25 & 40% - but I have only had a cursory look.

No one has instigated any claim for me yet as I have asked for some thinking space.
But i'm very concerned & confused about the way forward??

regards,

ps. I'm now 44!

EdInvestor

The compo money (if any) will be paid into the scheme, and you can't access any cash from the scheme until age 55, so bear in mind you would have to pay the fee from other sources.

Even if you are opted back in for new contributions, the old pension will remain contracted out.IMHO you would be better to devote some attention to the existing pension to see if it is performing, finding out

a) is the NPI pension subject to guaranteed growth rates or a guaranteed annuity rate? If so, what are these

if not

b) what fund(s) is it invested in and what is the projected maturity value of the pension? What are the annual charges being paid?

It is very important to manage these contracted out pensions properly or you may indeed find you are falling well short in 20 years time. Whether you are right now is a different question.Even if you did get misselling compo (unlikely) you would still need to do something about this pension, so i suggest you concentrate on that.

dunstonh

trouble is I am very wary of "independant financial advice" - but that is a whole new story

But you prefer the unknown and unqualified information from a website by people who could be aged 12 or live in America for all you know.

Very recently I was cold called by a firm of IF Advisors, who (obviously got my name off some serps register?) advised that I may have been miss sold the serps contract & should embark on a compensation claim.

They have misrepresented their status if you think that they are IFAs. That should tell you something about that firm straight away. Also, financial advisers are not allowed to cold call on investment business. It is a breach of FSA rules. Pensions come under investment class. Ambulance chasers can do what they like though but they are not advisers.

If you are going to be critical of IFAs, it does help to make sure that the people involved are actually IFAs.

They have been upfront about any charges I may incurr. ie. They would charge 11% (+vat) of any compensation I may be due & that this compensation could be in the region of £1000/year in the scheme!!!

Ed is spot on in that any redress that gets paid would be paid into the pension. You would have to find that 11% plus VAT out of your own pocket.

Another point is that it is very easy for advisers to justify contracting out as there are pros on cons with both decisions and unlike endowments, neither contracting in or contracting out is risk free.

For example, if you stated you wanted to retire at 60, which used to be the most commonly used retirement age in the period 1988-1998 which would cover the time you made the contracted out decision, then contracting out would allow you to do that but contracting in wouldnt. Contracted in pension (SERPS/S2P is only available from the state retirement age). So contacting out met your goals but contracting in didnt.

Another example is that you can get 25% of your contracted out fund as a tax free lump sum but you cannot with your contracted in pot.

Way way back in 1989 I went to an independant financial advisor & was advised that "the new big thing" was to opt out of Serps. This was apparently (as far as I remember) because the government were "giving away" a couple of extra percent tax relief to encourage people to do this. I was told that until I was "about" 40 I would be better off and that after age 40 I should think about opting back in.

All of which was totally correct.

My insurance company NPI seemed kosher & everything appeared above board.I would just get a letter once a year with a new balance ( but I never really looked at these statements as retirement seemed so, so, far away!

They were a very highly regarded insurance company who were completely wrecked in the mid to late 90s by Australian company AMP coming in and asset stripping them and leaving them financially insecure. That has resulted in returns dropping to zero on most of their investments (but not all - some have minimum bonus rates). With returns at their level, NPI are quite correctly contracting you back in.

As Ed says, your energy would be best spent on looking at the investment currently and adjusting it to suit modern day investing.

bobi22

Ok,
Firstly let me thank you both for your brutally honest replies.

I appreciate that I now know about having to pay fees upfront. I admit that I believed that any fees would automatically come from "any" compensation.
I now know better.

Secondly, I will definately be investing more time into looking at my existing pensions - the NPI one included.

I have always stated that "I never want to retire" - unless it was to a full time hobby or business, so your assumption that i may have wanted to retire at age 60 would be innacurate. I would not envisage having to need any lump sum before 65. I was always under the impression that it was always better to keep all your pension. Maybe I am wrong about that as well?

I appologise for stating that the firm were IFA's. I double checked today & you are correct; they are not, nor do they state that they are.

My quote about being wary about IFA's comes from, i'm afraid, bitter experience, of always going to an ifa when needing/wanting financial advice & nearly always being worse off in the longterm.
I didn't want to burden anyone with my hard luck stories so I just spouted off a soundbite. I can only apologise for that, as you seem to have taken some umbrige at my generalisation.

As for prefering unknown & unqualified information from American 12 yr olds. All I can say is, I didn't, I came here amongst other actions that I am in the process of taking, and asked for help instead.
And believe my, i'm glad I did.

Lastly, you intimate that I would be unlikely to get any compensation. Could you expand on that further?

regards,

dunstonh

As for prefering unknown & unqualified information from American 12 yr olds. All I can say is, I didn't, I came here amongst other actions that I am in the process of taking, and asked for help instead.

It should have had a smiley next to it. It was meant in jest.

Lastly, you intimate that I would be unlikely to get any compensation. Could you expand on that further?

To get redress for a mis-sale, it has to be shown that it was mis-sold. What would you complaint be? It cannot be that you wanted a risk free option as there is no risk free option with contracting out. The Govt have already reduced SERPS benefits 3 times and there is the risk they could pull it altogether leaving those contracted in with no second state pension. Something that has been proposed a number of times in the past (with a single higher state pension replacing it). The other option involved investment risk. However, it hasnt been so much the investment side that is a problem but the reducing rebates from the Govt. When you were told to contract out, the Govt was paying far bigger rebates and the decision to contract in was almost certainly the correct decision at that point. After Labour got in, the benefits began to drop away and whilst some still can benefit from contracting out, it is not the clear cut choice that it once was.

So, back to that question, what would you complain about? The fact that you were correctly told to contract out in 1988 but some time 10-12 years later it stopped being beneficial?

The FSA have said that they wont look at contracting out retrospectively. After all, you cannot take into account changes by the Govt 10 years after you took out a policy. In addition, for many years now, many providers wrote each year before the rebate was due to be changed asking if you wanted to contract in or not and that if you are unsure, that you should seek advice. Did you seek advice or did you just throw the thing in the bin (most threw it in the bin).

There are benefits to contracting out as well. The critical yield for a medium to medium/high risk investor can still sometimes show that there is a good chance of beating the required figure to match the current state level.

In addition, the ability to take 25% from your contracted out funds from age 50-75 as a tax free lump sum can be very beneficial. You cant do that with contracted in funds. Plus contracted in benefits start at the state retirement age (65, increasing through to 68). Death benefits are also higher under certain circumstances.

All it takes on the recommendation of the adviser is to state that you preferred investment risk over political risk or that you wanted the benefits available from age 60 and not 65 and that justifies the contracting out decision.

The ambulance chasers are running out of endomwent cases now as that saga is drawing to a close. They are now looking for other areas for their commission to be earned and they see with profits bonds and serps as two possible areas. However, the general feeling in the industry is that they have missed the boat on with profits funds as a recovering market has got rid of most MVRs. Plus, with the contracting out decision being easy to defend coupled with compensation going into the plan meaning individuals would have to pay out of their own pocket, its unlikely to be much of a goer. The Govt is also looking to regulate these claims firms as the actions and methods of many of them are just as underhand as what some of them claim happened with the sales of these policies all those years ago.

Middlestitch

bobi22 - if you are still concerned in spite of the very helpful replies given to your original query, why not get yourself some free, impartial (and well informed!) advice from the Pensions Advisory Service based on the particular facts of your case? I'm one of their volunteer advisers and this sort of case is truly an 'everyday' enquiry for us. Please give the Helpline a ring (0845 601 2923) or have a look at the website (https://www.pensionsadvisoryservice.org.uk) for more information. If you send in photocopies (NOT originals) of the relevant papers, one of the advisers will happily have a look at these.

Please let me stress again that this is a service which is free to members of the public - you won't suddenly find there's a bill lurking round the corner....

bobi22

Thankyou all.
I will certainly be taking further advice & the PAS looks good.
best regards,

bobi22

Further to my earlier posts, I have been doing some digging around & have further info.

Please feel free to pick holes in my theory.

Apparently, after talking to people with both "The Pensions Service" & The inland Revenue - it appears that I have FOUR separate contracted out Serps pensions up to 5th. April last year & then am contracted in now until I either retire or chose to contract out again in the future.

These contracted out serps arrangements run conncurrently (and even appear to overlap at some stages - but I cannot quite grasp how that is possible?) From September 1979 until April 2005.

I am now aged 44.

I THINK I would be better off staying contracted in from now on (for the next twenty odd years anyway) Am I correct?

My original question was regarding a firm of

Ambulance chasers

who are offering to claim compensation for one of these contracted out serps arrangement - namely one with NPI running from 1988 until 2005.
Their quote of about £1000/year compo still seems to me to be a "No lose" situation?

The reason I state this is for a couple of reasons.
1. Their charges seem less than their competitors. No win/no pay terms.
2. According to their Website (And I have checked them out to be a real firm by using info from companies house)

The Client is to pay******* Limited 11% plus VAT of the final compensation award arising from the Complaint managed by ****** Limited on behalf of the Client.

******* Limited will retain this 11% plus VAT of compensation and will instruct its bank to transfer the balance to the Client within 12 workings days.

If for any reason the Client receives the compensation award directly by the company managed by ****** Limited, the Client promises to forward to ****** Limited the due percentage of the award paid by the Insurance Company within 12 working days

Surely if I check the details with them & instruct them that in no circumstances can I accept having to pay anything out of my own pocket then the above terms seem reasonable.

I do also realise that there is infact a likelihood that I wouldn't receive anything.
But if I never try, I will never know, surely?

Other useful info.
NPI charge 1%/annum management fee.
As its a serps arrangement, the tranfer value is exactly the same as the fund value. (in the £20,000 + bracket (Roughly))
The policy is invested in NPI is in their normal managed fund & is not subject to guarranteed growth rates (as will be shown)- The annualised growth rate for that fund is :-
Over 1 year 11%
Past 3 years 12.3%
Past 5 years 4%
past 10 yrs 5.6%
(I take it that that means its performing well at the mo, but has performed less well in the recent past - but what I should compare these rates to I really dont know?)


BTW, I phoned the Pension advisory service on two separate occasions this week, but I am assuming I didn't know "The right questions to ask" as they seemed pretty vague to me, not

advice from the Pensions Advisory Service based on the particular facts of your case? I'm one of their volunteer advisers and this sort of case is truly an 'everyday' enquiry for us.

Maybe i'm wrong??

So, where do I go from here??????????????????

One last thing.
I dont really know what these serps contributions could be worth to me in my old age?
Is this really worth worrying about?
I should also point out that that I have a personal pension in place and another occupational pension as well as this arrangement.

regards,

EdInvestor

bobi22 wrote:

Apparently, after talking to people with both "The Pensions Service" & The inland Revenue - it appears that I have FOUR separate contracted out Serps pensions up to 5th. April last year

Have you had four jobs over the period?It might just reflect four separate contracting out decisions but always into the same pension.

am contracted in now until I either retire or chose to contract out again in the future.

I'd say this is right.

These contracted out serps arrangements run conncurrently (and even appear to overlap at some stages - but I cannot quite grasp how that is possible?) From September 1979 until April 2005.

See above, separate jobs?The overlap might be because you would remain contracted out in respect of a scheme related to a job you had already left over a period when you weren't working until you started a new job and activated the penion scheme, which might take a few months.

Their quote of about £1000/year compo still seems to me to be a "No lose" situation?

Disagree.

The reason I state this is for a couple of reasons.
1. Their charges seem less than their competitors. No win/no pay terms.
2. According to their Website (And I have checked them out to be a real firm by using info from companies house)

Surely if I check the details with them & instruct them that in no circumstances can I accept having to pay anything out of my own pocket then the above terms seem reasonable.

You don't seem to realise that no money will be payable directly to you, even if you win a misselling claim.The money will be added to the pension.It is not the same as endowment misselling.Thus you will have to pay the fee to the complaints company out of your own pocket.

NPI charge 1%/annum management fee.

OK.

As its a serps arrangement, the tranfer value is exactly the same as the fund value. (in the £20,000 + bracket (Roughly)

The reason it is actually the same is nothing to do with the Serps question.It is because it's a unit linked policy, not a With profits policy. [You can see why people are so confused - they are deliberately misled. :mad: ] The performamce is !!!!!!, I suggest you transfer it to a better scheme.

I dont really know what these serps contributions could be worth to me in my old age?

A person who had been contracted into SERPs from 1978 when it started until now, earning a fairly high salary throughout and retiring at 65 now, would get a SERPS pension of around 120 pounds a week,index linked.It would cost him about 120,000 pounds to buy that income on the open market.

So you have rather a lot still to save.

dunstonh

These contracted out serps arrangements run conncurrently (and even appear to overlap at some stages - but I cannot quite grasp how that is possible?) From September 1979 until April 2005.

You couldnt contract out until 1988.

I THINK I would be better off staying contracted in from now on (for the next twenty odd years anyway) Am I correct?

There are pros and cons of being contracted in and contracted out. You need to decide which are applicable to you.

Their quote of about £1000/year compo still seems to me to be a "No lose" situation?

Ed has already reconfirmed what has been said a few times on this thread. Any redress payable goes into the pension. Not your pocket. Also, were you mis-sold? What are the grounds for mis-selling?

I dont really know what these serps contributions could be worth to me in my old age?

Adds support to the point that you are just looking to complain to make a quick buck.

bobi22

I was slightly confused as my first job was in Devonport Dockyard. ie a civil service job, so I inadvertantly thought that a government job would automatically be "opted in" to Serps - but apparently not!

I understand from the revenue that there are four different contracted out pensions.

Not really worried about the different pensions, just what they would all add up to.
1. There is no Devonport Dockyard anymore. So how could I find out what the fund value of those 8/9 years is?
2. In 1987 in was privatised to be renamed Devonport Royal Dockyard - under Devonport Management Ltd (DML)
3. I left there in 1988 to go to sea.

ie the second serps pension arrangement is only for that short period of time

4. the third pension was the NPI one

5. the last one was two yrs with P&O


I am not going to coment further on the issue of charges, but I DO understand that no monies would be payable to me. What I was trying to say was, maybe the firm could have the money transferred to them. Then & only then would I find it acceptable to instruct them further.

If I do nothing now, I would not be in any worse situation, so whats the risk?

What if they WERE able to get compensation in the region of £17000/£18,000, into the NPI fund pot wouldn't that make it worth it??
i dont know?

The reason it is actually the same is nothing to do with the Serps question.It is because it's a unit linked policy, not a With profits policy. [You can see why people are so confused - they are deliberately misled. ] The performamce is !!!!!!, I suggest you transfer it to a better scheme

The reason that I stated ie

As its a serps arrangement, the tranfer value is exactly the same as the fund value. (in the £20,000 + bracket (Roughly)

was because that is EXACTLY what the man from the revenue (NI contributions section) told me.
-You mean he was telling me fibs!:mad:

I think I do earn a reletively high wage, (around 40K) above the national average anyway.

The question therefore is :- What would I expect in my serps pot if I had been opted in all the time?


lastly,
Ok, the NPI pension is !!!!!!!
Any thoughs on a good replacement vehicle?
Should I add all the opted out policies into one basket?

And i thought I was confused before?

regards,