Opt out of SERPS/S2P?

wizard5353

SERPS / S2P = Best to opt out. (For me anyway)
I chose to opt-out as the money goes in to my private pension and my employer also add's a bonus and matches it. So it's far better for me to opt-out.
Plus, it's very unlikely you will get any of this money back off the government if the state pension goes.
The government will continue to raise the pension age and as it stands now it's unlikely I will life long enough to get any state pension as 99% of my family members don't live past 65. It's a sad genetic fact
Last point to make is if you plan to move abroad like me when you retire you will not get anything back from the government.
Hence why you should opt-out ASAP. If anyone has any new information on the above points please let me know.
-NJ

jamesd

EmptyPurse, money you invest from the opting out process can be taken at any age after 55. Money left opted in can only be taken after your state retirement age, which will be 67 or more. If this flexibility is of value to you the decision to opt out is likely to be a good one for you. The government has retroactively reduced your pension benefit from being contracted in already, when it delayed your retirement age from 60, meaning you'll pay in for more years but get the pension for less.

The money that is paid into the pension each year you remain opted out will continue to grow while you're not working so that's not a factor. If you opt in, the annual money goes to the state scheme instead (in theory, it's actually just kept as a tax, it doesn't really exist as a pension fund). The opted out pension is secure from future retroactive government changes in retirement age, but not secure from all possible changes, just more than if you're opted in.

EdInvestor

wizard5353 wrote: »

Plus, it's very unlikely you will get any of this money back off the government if the state pension goes.

There is absoluetly no reason to think the state pension will go.All parties are committed to increasing it, not dropping it.

The government will continue to raise the pension age

No further rises are planned beyond those already announced which cover decades..

...as it stands now it's unlikely I will life long enough to get any state pension as 99% of my family members don't live past 65. It's a sad genetic fact

Possibly so but this doesn;t apply to the vast majority who are living longer and longer - 100 years won't look off to the next generation. if you live a long time a guaranteed index linked state pension looks a good thing to have.

Last point to make is if you plan to move abroad like me when you retire you will not get anything back from the government.

Rubbish. State pensions are paid overseas in the normal way.It is true that in some countries they are not uprated for inflation.

Opting in or out of S2P is a function of age and pay: young people with a higher salaries should on the whole opt out, as they won't lose financially and will gain flexibility.Older people with lower salaries will do better to opt in as they will definitely lose if they opt out.

Adviser21

As far as I understand this issue will go away in 2012 as the option to contract out will no longer be available. Generally rebates give poor value in these volitile investment times, and with mortality improving, annuity rates will probably fall, so in all probabality you will get less pension if you contract out. Flexibility and 25% of the fund as tax free cash remain reasons why some choose to contract out.

fpa_2

I am 31, in a full-time job for the last 3 years with a >50k salary and contracted in the S2P.

As I read a lot of this thread, am I right to assume that it's better for me to contract out and use the rebates in my employer's personal pension?

And if I contract out now, will that affect this tax year's contribution's or next one's?

I am also an EU national and it's possible that in the future I will start working in another country, I wonder if anyone knows which pension (state or private) would be easier to transfer?

Thank you for any help.

pocd1

With reference to S2P ... I am 62 and contributed to SERPS (now S2P).
I contributed for many years, and when I retire at 65 (2011), it was to help boost my basic state pennsion.

HOWEVER ... Gorden Brown has said tat in 2010, he is going to do away with SERPS payment !!!!! so all my contributions will be STOLEN back by the government.

If you think for one minute that all your contributions for the next 20years to the new S2P will still be there when you retire .... I doubt it.

I feel totaly let down, demoralised, robbed, and I needed the extra cash .... and had I know they were going to do this .. I would have opted out, and at least got some of my contributions back.

Good luck on what ever you do.

noh

pocd1 wrote: »

With reference to S2P ... I am 62 and contributed to SERPS (now S2P).
I contributed for many years, and when I retire at 65 (2011), it was to help boost my basic state pennsion.

HOWEVER ... Gorden Brown has said tat in 2010, he is going to do away with SERPS payment !!!!! so all my contributions will be STOLEN back by the government.

If you think for one minute that all your contributions for the next 20years to the new S2P will still be there when you retire .... I doubt it.

I feel totaly let down, demoralised, robbed, and I needed the extra cash .... and had I know they were going to do this .. I would have opted out, and at least got some of my contributions back.

Good luck on what ever you do.

No such thing has been said by Gordon Brown or anybody else in the government. You will receive S2P and SERPS when you reach 65.
So relax and stop looking upon yourself as a victim.

Nigel

dunstonh

HOWEVER ... Gorden Brown has said tat in 2010, he is going to do away with SERPS payment !!!!! so all my contributions will be STOLEN back by the government.

There is no plans to remove S2P/Serps at this time. It always will remain a risk that it could happen and a move to a single state pension would see it removed. That is a long term aim of many politicians but isnt something that is on the cards currently.

If it does happen then it is expected those that have contracted in will lose their S2P/SERPS only for them to be replaced with the higher state pension. Those that contracted out will get the higher state pension but also keep their contracted out benefits. That is based on the fact that the three previous times the Govt has reduced SERPS benefits retrospectively they have not made any attempt to claw back contracted out benefits. To do so would require primary legislations and would wipe billions off the stock market and create a recession.

I would have opted out, and at least got some of my contributions back.

You were too old to contract out when that option was introduced so you would have lost out financially.

Where do you get your information from? Wherever it is you have to stop listening/reading it because it is cearly flawed and inaccurate.

jamesd

fpa, I think that it is better for you to contract out. It should be easier to transfer. It may be best to set up your own personal pension instead of using the one from your employer - more choice and control for you that way. Also, the one from your employer might have higher annual management charges than one you buy yourself.

jamesd

pocd1, it's now expected around 2012 that S2P contributions to personal pensions will be stopped, along with contracting out. No need for you to worry because that will not take any money away that was put into them in past years. You will still get whatever pension is appropriate for the investments you bought in your pension plan with that money.