Opt out of SERPS/S2P?

DavidLaGuardia

dunstonh wrote:

You need to average around 3-5% a year above inflation to beat contracted in funds. Someone with a low risk profile is unlikely to achieve that with low risk investments. A higher risk investor could beat it and may consider it a viable option. In the early years of contracting out, it was much easier as rebates were more favourable. Labour have seen the rebates as a stealth tax though and reduced them.
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The problem with decision making is that there are two aspects:

The first highligted above is the Mathematical process in which we match up assumptions of future benefits according to current rates.

The second aspect is more subjective: The Political risk. Should a future government reduce the state pension be reduced further in real terms (let us in one example make the assumption that this occurs in the future for all but means-tested cases) the hind-sight view of staying in will be different and those with contracted OUT funds will have, at least, ring fenced their benefits.

Consequently, I do not believe anyone can firmly advise in this area and personally think the government should remove the second aspect with the choice between an actual state fund (let's say a National savings scheme) and private funds. I doubt the treasury would wear this as it would be more cost now in rebates. What they seem to prefer to do is leave the problem to the cost of future generations which is totally irresponsible.

EdInvestor

Another thing to bear in mind is the "hassle factor" later in accessing the money from the contracted out pension, as these are subject to different rules from ordinary pensions (they are controlled by a different Government department).

This matter is currently the source of some considerable irritation, unnecessary delay and confusion.

dunstonh

EdInvestor wrote:

Another thing to bear in mind is the "hassle factor" later in accessing the money from the contracted out pension, as these are subject to different rules from ordinary pensions (they are controlled by a different Government department).

There is no hassle factor. You tell the pension provider you wish to commence beneifts and after a couple of forms its all sorted inside four weeks normally. No different to ordinary rights.

EdInvestor

Protected rights pensions: the hassle factor

May not look like hassle to you DH, but I can assure you it does to everyone who's got one and wants a reasonable deal :rolleyes:There isn't even any publicly available annuity quotes for PR pensions so you can shop around.

dunstonh

That isnt hassle. That is just someone going DIY who has limited knowledge.

Its just like trying to fix the engine on your car when you dont know how it works.

EdInvestor

Not at all.The cause of the problem is the Government officials at the DWP.Regulatory risk is a serious hassle factor with pensions, much worse than any other product.

HapiChapi

I was employed when I contracted out of SERPS and started a personal pension with Friends Prov. One year ago I went self-employed and started a SIPP and transferred the small fund from my personal pension to the SIPP.

I was told that the Contracted Out part could not be transferred to the SIPP. Therefore do I just leave the Contracted Out part where it is or can I move it to a more beneficial place?
Do any of my NI contributions still go into that fund?
I don't appear to be receiving any statements any more from Friends Prov.

Any advice on this would be gratefully received.

EdInvestor

You may be able to leave the PR money behind in the FP pension, or you may have to open a new pension for it (either at FP or elsewhere).It depends on the structure of the original pension.Ask FP if the money is still there in the original pension.

If you are self employed you are not eligible for S2P or contracting out so there will be no NI rebates going into the fund now.

Keep an eye out for news that PR money has been let into SIPPs, hopefully this will happen over the next year and then you can move it.

dunstonh

Therefore do I just leave the Contracted Out part where it is or can I move it to a more beneficial place?

You can either leave it where it is, move it to a personal pension or a hybrid SIPP.

HapiChapi

Thank you for that dunstonh and EdInvestor.

I have 3 separate policy numbers for the protected rights part with a total value of around 14K which isn't a great deal.
FP have sent me a letter saying I should seriously consider contracting back in because the value at retirement could be less than the government pension.

When I transfered the Personal pension policy to a HGL Sipp I was not informed that I could transfer the protected right policies to another fund. I was just told they could not go into my Sipp.

I will keep an eye on the news - i have read other threads on this and would still rather be contracted out and take the risk and hope the fund will beat the government pension in the future. Obviously it would be much better to add the sum to my Sipp if this becomes available - wouldn't it?

I know there is another thread regarding ISAs v Pensions which I have read and I must admit that i am becoming more adverse to pensions steering more towards the ISA route because of the flexibilty in terms of getting the money out. I currently do not contribute to my Sipp (fund value only 7k) which is probably not a good idea as the fund is so small. However, i do see the advantages of a pension in terms of tax - especially as a selfemployed person. Do you think it would be better to at least contribute a small monthly amount to the Sipp rather than keep buying shares for the ISA?