Opt out of SERPS/S2P?

EdInvestor

yelf wrote: »

Considering the state of public debt, the changes in demographics, and the government have started discussions whereby citizens may have to insure against unemployment (to take the burden away from JSA):

Would you consider contracting out on the basis that if you contract out at least you have that money in your own pot - as opposed to a potntially failing ponzi scheme.

It's hardly worth making a new election considering contracting out will be abolished in 2012.The rebate money you will get in that period is pretty small.If already contracted out, may as well remain so until you are forcibly contracted back in in due course.

dunstonh

Would you consider contracting out on the basis that if you contract out at least you have that money in your own pot - as opposed to a potntially failing ponzi scheme.

legislation risk is one of the valid reasons for choosing to contract out. However, as Ed says, there is only a couple of years left to do it. So any gains/losses are going to be small.

jamesd

Yes, those are good reasons for considering it.

Also note that you can take the lump sum and income from the contracted out part at age 55 instead of having to wait for state retirement age. Both of those ages will probably increase but the flexibility is useful if you have any hope of retiring early.

My own planning suggests that I could barely retire at 49 on current spending levels, 51 at a good target income level. ISA investments cover the gap between retirement age and pension taking age. Not really enough safety margin doing it exactly on those thresholds, though, that takes a few more years.

If you want to retire early, nothing like starting now and making contributions at levels that can make it possibly achievable, instead of just a nice thought. That also gets you nice protection from any state pension issues.

yelf

dunstonh wrote: »

legislation risk is one of the valid reasons for choosing to contract out. However, as Ed says, there is only a couple of years left to do it. So any gains/losses are going to be small.

What happens if an employee opts out of personal accounts? They will get no extra from the state? So to get something in addition from the state one will have to be opted in?

EdInvestor

yelf wrote: »

What happens if an employee opts out of personal accounts? They will get no extra from the state? So to get something in addition from the state one will have to be opted in?

Depends.The big danger with personal accounts is that a low paid user might find that the pension simply replaces state benefits he would get anyway.

yelf

EdInvestor wrote: »

Depends.The big danger with personal accounts is that a low paid user might find that the pension simply replaces state benefits he would get anyway.

surely that already exists with pension credit?

jamesd

yelf wrote: »

What happens if an employee opts out of personal accounts? They will get no extra from the state? So to get something in addition from the state one will have to be opted in?

The state piece is mainly the tax rebate into the pension and that will still be available for personal pension contributions.

The nastier bit about the personal accounts is the bar on transferring the pension pot out to a private pension company if you find that the investment options don't match your needs. Best to completely avoid the whole personal account system if you can persuade your employer to do that and might have even the slightest interest in managing your investments to try to improve your pension.

If it wasn't for the lock-in it'd be a good concept. As it is I'll probably suggest to anyone interested enough to ask a question here that they should avoid the system if it doesn't cost them lost employer contributions.

shopaholictiedtheknot

Jay-Jay wrote: »

I've just fallen over this thread by accident and it's got me wondering.

I was advised by my employer (IFA), at age 18, to contract out of SERPS. I never really understood the issue so agreed. Now,12 years on I still don't have a private pension plan and I haven't contributed to SERPS either!

Sorry to hijack this thread but something tells me that I need to get my finger out and do something QUICK. Can I contract back in?

How do i find out where my money is - i have the same problem?!!!

EdInvestor

shopaholictiedtheknot wrote: »

How do i find out where my money is - i have the same problem?!!!

Contact https://www.thepensionservice.gov.uk They will tell you where you were last contracted out, and/or help you to contract back in and send you a state pension forecast.

gratefulone

Many years ago I took out a personal pension plan and contracted out of the state earnings related pension scheme. I have just received a letter from the pension company telling me that Government changes mean this will end shortly and the value of the plan will drastically reduce. I would be most grateful if anyone could suggest where I could find out more about the pros and cons of continuing with the plan or should I re-join the SERPS? Thank you for all the helpful advice given on this thread so far. I am in my late 40's, currently working but on a fairly low income, receiving tax credits, and have taken time out to raise my daughter. I am not planning on retiring early and would really like to know if it would be more beneficial for me to contract back in to SERPS/SP2 now? Any help would be most welcome.

Many thanks