Opt out of SERPS/S2P?

dunstonh

pension-newbie wrote: »

Not sure if this is the right place to ask - I want to transfer my contracted out SERPS pot (I am now contracted back in) to a different pensions provider, but there are some protected rights invovled and I can't judge their value if any. So I guess I need specialist advice - where can I find out what is a reasonable fee (commission or up front) for someone to provide me with advice on whether to transfer out of existing provider and if so to create an investment strategy for the money - which is just under £60000 and ongoing investments of £350 a month.

A fee in the range of £500-£1000 with all commission rebated would be about right. Maybe more expensive if you use city based advisers or employed advisers.

The fee can be collected via the commission system if required. A pot of that size should be fee based rather than commission (as a typical commission would be around £3000 so fee based with commission rebated will be cheaper).

pension-newbie

thank you dunstonh - I have had a good read around the forum today and I see there is much to learn and plan. I appreciate your help - I thought it would be under £500 so a bit low but not too far off

colinbloke

im 35 and started my first private pension with scottish widows aprox 9 years ago and opted out of serps. i stopped paying into it 2 years later when i changed jobs.
i now have a company money purchase pension which i have been paying into for the past 7 years. my private scottish widows pension has still been recieving the goverment serps contribution and has a transfer value of aprox £10,000 im wondering should i transfer this fund value to my company pension current value £16,500 and opt back in to serps or stay contracted out?

dunstonh

colinbloke wrote: »

im 35 and started my first private pension with scottish widows aprox 9 years ago and opted out of serps. i stopped paying into it 2 years later when i changed jobs.
i now have a company money purchase pension which i have been paying into for the past 7 years. my private scottish widows pension has still been recieving the goverment serps contribution and has a transfer value of aprox £10,000 im wondering should i transfer this fund value to my company pension current value £16,500 and opt back in to serps or stay contracted out?

What you ask is far too specific for anyone to give you an answer

The pension transfer needs a transfer analysis done to compare the costs/benefits. The decision to contract in/out is a personal one based on your view of what you think it best (working on the basis that for an inexperienced investor, the decision is likely to be cost neutral on rebates paid before age 45). People will have different views on what options are best for them and what risks they are willing to accept.

This thread already covers the pros and cons of contracting in/out. So, no need to repeat them. Have a read of it and then decide for yourself.

guitarman001

Still at a loss as to whether to opt out or not. Basically I don't trust the government (especially if Labour get back into power). When is the deadline for contracting out? I heard it was this year...

Paul_Herring

guitarman001 wrote: »

Still at a loss as to whether to opt out or not. Basically I don't trust the government (especially if Labour get back into power). When is the deadline for contracting out? I heard it was this year...

Contracting out is where you get rebates on any NI you've paid during the year.

The rebates themselves stop this tax year. Next tax year (6th April '12) there will be no such rebates.

So yes, the 'deadline' is this year.

Or rather it's being abolished this year.

dunstonh

Still at a loss as to whether to opt out or not

You should not opt out of an occupational pension. If you are referring to contracting out then you are running out of time. The deadline for most is the end of this month.

The rule of thumb is that if you are under 45, employed (as it doesnt matter if you are unemployed or self employed) and earning in excess of £15k a year then contracting out may be beneficial to you if the differences meet your objectives.

especially if Labour get back into power

There is no chance of Labour getting into power in the next 12 months. So, I wouldnt worry about it.

s-a-h-

Could someone confirm some points for me? When the new rules come in,
1.do people opted out become opted in automatically?
2.is it worth swapping from in to out for the last year or so?
3.when one retires and has a number of years as having opted out, and is up to date with contributions, would they receive state pension, the new 2nd state pension (set the same for all) and an extra pension from the opted out period?
4.if point 3 is correct, that means that the people who opted out would benefit!

dunstonh

1.do people opted out become opted in automatically?

They will be contracted back in automatically.

2.is it worth swapping from in to out for the last year or so?

You have less than a week to do that as most have a cut off at the end of March. Its not really worth it. Especially if you have never contracted out before (based on current state pension proposals and information known)

3.when one retires and has a number of years as having opted out, and is up to date with contributions, would they receive state pension, the new 2nd state pension (set the same for all) and an extra pension from the opted out period?

The indication is that £40 of the £140 proposed will be linked to contracted out benefits. We don't know yet how much that will be reduced by. One article suggested that anyone who has contracted out at any point will lose the £40. However, another indicated a pro-rata reduction. The fact is that we don't know yet and its still under consultation and discussion.

4.if point 3 is correct, that means that the people who opted out would benefit!

Basically, anyone who has contracted out and their protected rights pot is projecting an income greater than £40pw in todays terms has done well be contracting out. Mine is projecting at £157pw for example. Remember that most people who contracted out have done better. Up to 1996, everyone who contracted out was financially better off (research conducted by the SIB at the time). It fell back after 1997 partly as Labour reduced the rebates (stealth tax) and we had two major stockmarket crashes in 10 years - although the latter is temporary as rebates paid in those lower years go on to make the most money when it recovers and therefore averages it out).


For reference, the thread title is incorrect. Opting out means someone who has opted in/out of their occupational pension. The correct term is contracting in/out.

Jerrycan_2

Hi

I am currently contracted out of S2P ( since 1990 ) and I know that I will be automatically contracted back in next April.My question is this - At the moment I believe I can take 25% of my 'pot' as a lump sum when I retire as I am contracted out. I will not retire for another 10 years. As things currently stand will I still be able to take 25% of my pot when I retire or does this 'entitlement' evaporate when I am automatically contracted back in:question:

Jerrycan