Opt out of SERPS/S2P?

jamesd

When contracting out, are there any significant merits to having the protected rights money from that going into a different pension from the rest of the pension money?

Perhaps if relocating the fund abroad later, where there may be a limited choice of places that can take protected rights money?

EdInvestor

A useful explanation of the reduced rebate problem

When contracting out, are there any significant merits to having the protected rights money from that going into a different pension from the rest of the pension money?

At present, PR money cannot be put into SIPPs,so often you are forced to put it somewhere else - ie in an insured fund. One way of mitigating this problem is to invest the PR money in assets which are not easily available outside insured pensions - eg commercial property funds.

dunstonh

hybrid SIPPs and fund supermarket SIPPs can take protected rights. That means you can use unit trusts/oeics (which is what most people do in full SIPPs nowadays anyway). So you dont have to put it in insured funds.

FloAnna

EdInvestor wrote:

When companies like yours write to their customers to advise them to contract back into S2P, what do they suggest should be done with the contributions sitting in the remaining fund?

Do they explain how the money is now often in zombie funds and will not grow?Do they point out how the high charges on these old contracts will eat away at the fund, especially with no more money coming in?

Or do they say nothing, because it is quite likely that many unsuspecting customers will think that ALL their money has now gone back into the state scheme, so they will get the full S2P when they retire?

Not that the contracted out money will stay contracted out forever, in the mouldy old pension at the lifeco, producing something verging on the worthless when they retire.


That's the point at which we're going to get pensions misselling drama No 2. Probably from about 2020 onwards.....

I know that the company i work for has explained everything u have said in the letter that is sent to them including the option of transfering
Dont know wot else they are going to do.. I know that at this time pensions that are unit linked are rubbish. Well everything that is offered in the company i work for.

dunstonh

Dont know wot else they are going to do.. I know that at this time pensions that are unit linked are rubbish.

You what? Unit linked investment funds are what you want on a money purchase scheme. Just a decent range of the quality funds is what you want.

whambamboo

Am I the only one concerned that a company selling sophisticated financial products and advising people to opt in under all circumstances is employing staff who are apparently functionally illiterate? I wouldn't normally comment on this kind of thing, but I find this frightening for a number of reasons.

dunstonh

whambamboo wrote:

Am I the only one concerned that a company selling sophisticated financial products and advising people to opt in under all circumstances is employing staff who are apparently functionally illiterate? I wouldn't normally comment on this kind of thing, but I find this frightening for a number of reasons.

When you deal with insurance companies as long as I have you will realise that you often have to tell them what they can and cannot do.

To be fair to the staff, they are not financial advisers and they tend to either focus on one area of business or get a bit of info on all areas. The staff that focus on one area tend to be very good but those that float around the different areas or are in the general call centres tend to be awful. A little bit of knowledge can be a bad thing and know your limitations.

dunstonh

83 per cent choose to remain contracted out of S2P, says L&G

Based on 3193 responses received as at 13 November, 2644 customers opted to stay contracted out.

The news comes as several firms such as Norwich Union continue their policy of mass contracting in customers that have failed to respond to correspondence presenting them with the options.

This move has been criticised by Legal & General pensions strategy director Adrian Boulding who says people contracted in without their knowledge may well have grounds for a misselling complaint if they lose out as a result.
But NU has defended its strategy, arguing it has done everything possible to make customers aware of the options.

Legal & General, meanwhile, is issuing the same message to customers for the 2006/2007 tax year is the same as last year.
If customers wish to maximise the pension they can expect to receive at State Pension Age it says they are more likely to achieve this by contracting back into the State Second Pension.
But remaining contracted out gives customers more flexibility as a personal pension gives them the option to take benefits, including tax free cash, prior to State Pension Age.
Boulding says:
“While it is still early days, on the basis that those who reply quickly usually have the strongest views, the results vindicate our stance on the importance of giving customers a choice regarding their contracting out decision.”

Boulding adds: “We have placed a great deal of emphasis on communication with this year’s mailing to customers which, as well as a personal letter, has included a full Question and Answer leaflet and a link to a podcast (www.legalandgeneral.com/podcast) to help pension customers make their contracting out decision for the 2006/2007 tax year.”

----article ends.

Ignoring the L&G vs NU media battle which often gets in the way of things, the biggest difference could be that most of NU's contracted out rebates go into with profits plans whereas L&G have a greater content of unit linked plans. UL giving higher potential for growth over the long term. So, the actions of both companies could be correct for the majority of the policyholders. I say majority as there will be some NU policyholders worse off by contracting in.

The main point of interest was the number choosing to remain contracted out. Especially when the L&G letter does say that they are likely to get less from an income point of view. It appears that people do prefer to be in control of their money and want the lump sum and flexible date.

jamesd

I'm more interested in the opt in/out results from NU, in case those reflect their different investments.

Why does NU think it has the authority to act as the agent of the customer? That's the part of this that shocks me - they seem to be acting far beyond what they have been engaged to do. Any other areas where it may think it has that authority?

new_girl

my oh is due to retire in 5 years he only has a small private pension plan as he was out of work for several years and stopped paying into it and didnot restart when he started work again

His insurance company legal and general keep writing and saying he maybe better of if he contracts back into serps but as we will have very little income other than state pension would he be better off staying contracted out as if he took his private pension in a lump sum we might than qualify for some state benfits