Opt out of SERPS/S2P?

EdInvestor

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.

Are you paying class 11 voluntary contributions for the basic state pension?If not, look into it: these cost a bit over 2 quid a week and are far and away the best pension investment around, one of the few perks for the self employed .

Keen_Saver

I am currently opted out of Serps (have been for the last 16 years) and have recently had a letter asking if I want to opt back in.

Is there a guidance web site where you input your details to get an idea on what would be best to do based on your circumstances?

For the record, I am 34 and currently in full time temporary employment, any advice would be appreciated as I have no idea what's for the best anymore.

jamesd

At 34 and if it was right for you before and your income is about the same it's probably still right for you. I summarised many of the issue here.

One vital aspect is the quality of your investment choices, so it's worth checking them if you just chose the default of some pension plan. If you're not sure of your risk profile, dunstonh will send you a risk profile questionnaire if you use the email link.

Keen_Saver

Thanks for the reply James, I remember choosing a low risk option with Brittanic Assurance if that helps.

I failed to make any National Insurance contributions between 2004 & 2006 because we were in Spain, does this make much difference to whether I should opt in or out?

I am in a low wage bracket (will be under £15,000 gross in this tax year).

jamesd

If you chose a low risk option and value only investment returns, then you should probably either opt back in or switch to at least medium-high risk. Cautious is much less likely to make you better off with the lowered government payments being made today.

Please ask dunstonh for that questionnaire and then start your own thread in the pension section, beginning with the full contents of your posts here and the results of that questionnaire.

One thing you should do is review whether it's best to keep the money in that Britannic Assurance pension. It seems likely that it's a good idea to move it elsewhere, where you can probably get better investment choices than currently available to you.

In theory you're at an age when high risk is the best option, since you have a long time to go until retirement. But that doesn't matter if you can't sleep at night, so it's your personal risk tolerance that matters.

Nordic

Hi new to the fourm,

I contracted out in about 1988 and have remained out since then.

Like most people I was advised to go back over the last few years and finally last year I did and instructed my provider so.

I have this morning recieved a letter from them saying that, and I quote 'Unfortunately we did not process your slip, so did not send the CA1543 form to HMR & C in time for them to record it. they ware unable to contract you back in for 2005/06 tax year'

It goes on to say that according to thier calculations to determine if I am likely to have lost out by their mistake, surprise surprise I have not and therefore no compensation payment is due.

I can only surmise that the pressing need last year to opt back in was wrong, as I would have lost out. As according to them I did'nt lose out by remaining out this year then i would have been worse off by being back in. (does that make sense?)

So my question is, should I challage their statement and ask to see the calcations that give them the insight.

My feeling now has changed from last year in any event and I think I would prefer to take my chances with a private company, and see this as divine intervation.

jamesd

The gain or loss depends on investment returns. You can speculate whether you will or will not be better off but once you have contracted out they can look at the returns over the last year to determine that you have not yet been made worse off. That could change in the future. So long as your investments are at fairly high risk levels you should be better off contracted out than contracted in unless you are within 5-10 years of retirement.

About 1/3 of people are better off contracted out. The letters generally say that you should consider if you would or would not be better contracted back in. "May be" or similar wording. This is not a personal recommendation. What it is is a correct suggestion that you should evaluate your position.

The letters also provide some protection for the pension companies against future claims that they mis-sold the opting out option.

The difference for a single year is not huge. I suggest not being very upset with them about the financial side, just the customer service issue.

Where is your money invested? If it's not in a good selection of funds, as it may well not be if the policy is 19 years old, I recommend that you start a new discussion about that and provide details. The gain from reviewing and choosing either better investments or a better pension plan can be far greater than the difference in one year's contracting in or out.

Keen_Saver

Hi,

I sent a PM to Dunston earlier this week to request one of the forms but so far no reply, is he away does anyone know?

Thanks

jamesd

Dunstonh may not have noticed the PM. Email is the best way. An annual compliance audit was this week so even when dunstonh gets it it might take a few days to catch up.

EdInvestor

jamesd

Perhaps dunstonh would like to post this risk profile questionnaire on the forum so people can try it out.

People might think you are promoting his business, which is not allowed, if you keep directing posters to his email.