Opt out of SERPS/S2P?

KiNeL

In other words she can commute the fund at 60 not 61y7m ?

Leodogger

My husband has just received his pension award notice (he gets his state pension in September 2011). He was contracted out of SERPS for a few years in the 80's as he had a personal pension with Prudential and has subsequently been receiving his pension from this and his protected rights pension for a couple of years.

However on the state pension notice they have deducted an amount of £23.19 from the Additional State Pension based on his earnings from 6/4/1978 to 5/4/1997) referred to "as earned from an employer's or personal pension scheme from 6/4/1978 to 5/4/1997".

Pensions are a mystery to me but I do not understand and neither does he, what this deduction is for as I thought the NI contributions were paid by the government TO PROVIDE a personal pension in addition to his state pension and additional state pension.

Can anyone explain what this deduction from his state pension is for ?

dunstonh

However on the state pension notice they have deducted an amount of £23.19 from the Additional State Pension based on his earnings from 6/4/1978 to 5/4/1997) referred to "as earned from an employer's or personal pension scheme from 6/4/1978 to 5/4/1997".

It means that during those years (not all those years but at some point in that period) he was contracted out. Had he been contracted in he would have got £23.19 from the state. He can now compare that against the personal pension (and any employer pension if applicable) to see how it compares.

Pensions are a mystery to me but I do not understand and neither does he, what this deduction is for as I thought the NI contributions were paid by the government TO PROVIDE a personal pension in addition to his state pension and additional state pension.

No that is not right. it would be nice but impossible.

You pay into a personal pension to boost your retirement benefits. Contracting out doesnt give you something extra on top of the basic and additional state pensions. Contracting out reduces the additional state pension but allows you to choose how you want to invest the money that would have gone towards the additional pensions with a view to getting a greater amount or taking advantage of the benefits of contracting out (e.g. 25% tax free cash, ability to take at a different age, different death benefits etc).

So, if his protected rights fund on the pru pension (assuming no contracting out via a workplace pension or other scheme) pays more than £23.19pw then he has made more by being contracted out (remember to factor in the 25% tax free cash if that was taken).

Leodogger

dunstonh wrote: »

It means that during those years (not all those years but at some point in that period) he was contracted out. Had he been contracted in he would have got £23.19 from the state. He can now compare that against the personal pension (and any employer pension if applicable) to see how it compares.



No that is not right. it would be nice but impossible.

You pay into a personal pension to boost your retirement benefits. Contracting out doesnt give you something extra on top of the basic and additional state pensions. Contracting out reduces the additional state pension but allows you to choose how you want to invest the money that would have gone towards the additional pensions with a view to getting a greater amount or taking advantage of the benefits of contracting out (e.g. 25% tax free cash, ability to take at a different age, different death benefits etc).

So, if his protected rights fund on the pru pension (assuming no contracting out via a workplace pension or other scheme) pays more than £23.19pw then he has made more by being contracted out (remember to factor in the 25% tax free cash if that was taken).

Thanks for making that clear. Yes he is marginally better off with his prudential protected rights pension and of course he got his lump sum too. It was just confusing him that they take this sum off the pension award notice and all previous forecasts did not mention the amount before.

At least he will not be liable for paying tax now on his total pensions which with his state pension and personal pensions took him over the £9940 allowances and would have resulted in him paying tax on his personal pensions !

So the reduction in state pension is a mixed blesssing.

rc28

Referring to post number 457.

I am unsure if s2p rebates will be paid for my 2011/2012 contributions.

I have received my s2p rebates for 2010/2011 at the start of June this year.

Does this mean that i will not receive anymore rebates from here on?

Post number 457 says no rebates after April 2012.

A recent news article from pearl pensions says rebates will continue after April 2012 for contributions already paid. (unable to post link to article)

Just after some clarification on this one please.

Ricky

Paul_Herring

rc28 wrote: »

A recent news article from pearl pensions says rebates will continue after April 2012 for contributions already paid. (unable to post link to article)

http://www.pearl.co.uk/pearl/pearl.nsf/Content/news-article-pensions02

From 6 April 2012:

individuals will no longer be able to contract out of the State Second Pension (S2P) through a money purchase pension scheme; and

protected rights funds will cease being subject to special treatment so they will be used to provide benefits in the same way that non-protected rights funds are used.

If that's what you read (or something similar) all it says is rebates already paid up to 2012 will no longer be treated specially. There will be no additional rebates after 2012.

jamesd

If you're contracted out you'll get one more rebate, for the current 2011-12 tax year.

From the start of the 2012-13 tax year you will accrue no more contracted out rebate entitlement but will instead be contracted in. This accrual stop doesn't prevent payments you're entitled to from previous years being paid or adjusted.

rc28

Paul, Yes that was the article i have read.

James, thanks.

So i can expect one more rebate next year for the 2011/2012 contributions.

Thanks

gbb007

I would not recommend contracting out of S2P (second state pension). The ability to will cease in April 2012. Anyone contracted out with a defined contribution scheme such as a personal pension or a stakeholder pension will be contracted back into the state scheme.

webmister22 wrote: »

I am a 25 year old guys and I've just decided its time to start a pension. A friend has mentioned that they have opted out of SERPS/S2P. Does anybody know how this works and whether it is a good idea for someone my age?

Thanks in advance.

webmister22

<EDITED BY PAL: THE QUESTION OF CONTRACTING OUT COMES UP ALL THE TIME, SO I HAVE MADE THIS THREAD STICKY. I HAVE ALSO TRIED TO CHANGE THE TITLE BUT MY BOARD GUIDE POWERS ARE TOO WEAK AND THE PROPER MODERATORS ARE IGNORING ME )

dunstonh

I would not recommend contracting out of S2P (second state pension). The ability to will cease in April 2012. Anyone contracted out with a defined contribution scheme such as a personal pension or a stakeholder pension will be contracted back into the state scheme.

It's too late. The last date for contracting in/out has gone.

Also, why would you not recommend it? That is strong language without any context given