Opt out of SERPS/S2P?

jediknight49

Just some quick advice required.

I too have received a letter from Standard Life regarding S2P. Not sure what to do to be honest. My financial advisor said thats it was up to me what to do, which given the booklet and information on these threads, still leaves me confused!

I contracted out at the age of 16 (1988), and my current plan value as of Sept '08 was £33,454. I'm due to retire 2037.

My monthly pension contributions have been on hold for around 15 months now due to financial restraints (i paid around £50 p.m into the plan).

Is it worth staying out of S2P or contacting back in?

Any advice would be appreciated.

Thanks

dunstonh

My financial advisor said thats it was up to me what to do

Thats helpful...not. Is he a tied agent or an IFA?

Although, in part that is correct. Its a decision you make on whether you feel investment risk or legislation risk and whether you want 25% of a pot and/or a different retirement age from state.

You are still within the age group where its ok to contract out. However, if the SL pension is investing in a low quality way, then it may be worth contracting back in unless you change the pension investments.

jediknight49

He is IFA.

I am keen of flexibility with regards to retire age and lump sums ect.. so its probably best for now to stay as i am, and keep an eye on any developments
that take place.

Always difficult trying to see the future it is..

tartanterra

tartanterra wrote: »

I will be trading as a limited company, so surely there must be some difference to what I'm doing now which is basically paying part of my salary into a stakeholder?
Can't the limited Co. make contributions as well?

Anyone there!?

tartanterra

tartanterra wrote: »

Anyone there!?

Hello!!!!!!!!!!

veepod

I am in a similar postion to JJ, except in my late 40s. i opted out early on (in my 20s) and that seemed to be that as far as I knew. No one told me any different. i do have a stakeholder pension, and pay a small amount into a private scheme. I have been self employed for much of my working life, or bringing up children. im not sure I would have paid enough contributions anyway.
At any rate Im very confused with all this, have never heard of SP2, and wonder if Ive just missed out big time or whether actually Im ok.
Now that Im working for someone else, should I be asking about rebate? I understood that it was all just recorded somewhere and that I simply didnt pay the extra.
Any advice very gratefully received.

dunstonh

At any rate Im very confused with all this, have never heard of SP2, and wonder if Ive just missed out big time or whether actually Im ok.

When you are self employed, you are not able to contract out. You were just contracted out on paper, not reality. The self employed dont qualify for the second state pension. The Govt takes the view that self employed prefer to pay less NI and do their own planning. Of course, many self employed dont realise they are going to get lower state pensions and pocket the extra money.

Now that Im working for someone else, should I be asking about rebate?

You are now past the pivotal age to contract back in. So, if your pension scheme is still contracted out on paper, then you should contract back in.

Baz_2

Dunstoh, whats the thinking behind this pivotal age for contracting back in you have been posting?

I'm 36, contracted out since I was around 23. Like the idea of a tax free pot and retiring before 67 so want to keep contracted out.

However, I also like the idea of having half my time contracted out and half contracted in. Seems a good way to spread the risk around.

Saying that would mean I would be looking to contract back in when Im around 42-43. But Im wondering what these new rules are that you mention etc.

Can you explain it in a nutshell?

dunstonh

Dunstoh, whats the thinking behind this pivotal age for contracting back in you have been posting?

Every year the rebates get changed (sometimes the Govt sets multiple chunks of years as they have done recently). So, the pivotal age can change over time.

As you get older the size of the rebate gets bigger (less time to invest). However, Labour have capped the rebate after age 43 at 7.4%. Back in 2003 for example it went up every year until age 52 and was 10.5% at that point.

The pivitol age is around 43-45 for men. After that you would need your investments to grow by more to make up for the lost benefit. You may decide its a risk worth taking but it becomes unrealistic as you get closer to 50.

Saying that would mean I would be looking to contract back in when Im around 42-43.

You wont get the choice. Contracting out is being abolished for personal pensions in 2012. You will be auto contracted in after that.

janejsb

My husband has received a letter from his Scottish Widows regarding him being "contracted out" of the State Second Pension scheme. He has been contracted out for some years and he needs to make a decision by the 27th March 2009 whether to opt back in to the State Pension scheme. He is 51.

we would appreciate any advice as we feel loathed to seek advice at this moment from a financial advisor, the last one we took advice from was in it for his own gain and cost us dearly. As the saying goes "once bitten twice shy"!! Can anyone help.

Many thanks