Opt out of SERPS/S2P?

dunstonh

My question is, will that pension forecast be taking account of the fact that I used to be contracted out, back in the 70's and 80's?

Yes.

Will the Govt 'know' this from my NI number, or do I have to tell them?

its done under NI number.

TableTop

Thank you Dunstonh

ChocClare

I have a similar question which I hope doesn't sound too numpty to all you experts.

I contracted out of SERPS in ABOUT 1988 and put my money with Equitable Life (where is the rolleyes smilie when you need it?!).

Then there was the whole brouhaha with them and I subsequently opted back in. I can't remember exactly when but it was some time prior to 2001.

As I understand it - and I may well be wrong - you need to work 30 years to get the full state pension.

I started work at 22 and am now 49, so I have 27 years under my belt. I will presumably have to carry on working/paying national insurance until I am 66, so POTENTIALLY I will have 44 years' contributions.

However, I am aware that I have a "gap" in that for at least ten years I was opted out of SERPS.

My question is, how do I check EXACTLY how long I was out of SERPS and, more importantly, how do I find out what, if any, impact this will have on my state pension? Obviously, I have statements from Equitable Life going back donkeys' years but it's really the government side of things that I want to check to make sure it tallies with what I think, and that I still have enough working years left to make up any shortfall. Or doesn't it work like that?

Apologies if this has been asked before - I couldn't find it.

Paul_Herring

ChocClare wrote: »

As I understand it - and I may well be wrong - you need to work 30 years to get the full state pension.

SERPS/S2P is not connected to the state pension calculation.

For a full (basic) state pension, you need to be making minimum NI contributions for 30 years. Contracting out doesn't 'delete' those contributions for those years - they still count towards your (basic) state pension.

However, I am aware that I have a "gap" in that for at least ten years I was opted out of SERPS.

There is no gap wrt your basic state pension.

The only 'gaps' there will be will be for any increase due from SERPS/S2P, which the rebates in your private pension should (hopefully more than) make up for.

ChocClare

Thanks for that, Paul.

I realise that (hopefully!) the pension from Equitable Life should counteract the difference.

My question was really whether my working for longer would mean that I could "regain" the SERPS/S2P bit as if I had never opted out (thus making the Equitable Life a nice bonus ON TOP of the pension)? And how could I find this out? Or is it simply that once you've paid 30 years' contributions, any further contributions "don't count"?

Excuse ignorance

jamesd

There are two parts to the state pension:

1. The basic state pension. This is not related to earnings and is just based on years of contributions paid. It stops increasing after 30 years. Contracting in or out has no effect on this.

2. The additional state pension. This is earnings-related, gradually becoming flat rate over the next 20 or so years. There is no cap on how much you can get for this and it accumulates for every year that you work. If you contract out you don't accumulate any of this for the years that you are contracted out. For those who are in their 20-40 or so age range the maximum achievable amount at the maximum payment level is around £3,000 a year. Older people can have accumulated at higher levels than that, twice as much or even more, depending on just how old. This is because the system has changed to subsidise low earners, who now get more, at the expense of higher earners, who now get less.

The contracted out money that you get to invest should in general be able to equal or beat the amounts you'd have got from staying contracted in. It depends on the investments that you choose to use and how well they do.

If you ask for a state pension forecast they will tell you your current entitlement to each part (1 and 2) of the state pension and what you're expected to get if things continue unchanged. They won't tell you anything about your contracted out pot with the pension company.

[Deleted User]

Been contracted out for about 20 years (I'm 43 now). Not sure if I should have contracted back in by now (how do I tell?) but the money has been going into my pension every year and growing.

I understand in April this all stops. What happens then? Assume my fund just carries on with no further income.

Do I then to start to build up S2P in my remaining years working as well? How does that work?

dunstonh

Not sure if I should have contracted back in by now (how do I tell?)

43-45 is generally the optimal age to contract back in. As it happens, this is the final year of contracting out on money purchase schemes. So, you will be contracted in automatically.

I understand in April this all stops. What happens then

Great news for those that contracted out. The contracted out money is currently known as protected rights and has a number of rules attached to it. From next April, they will be reclassified as non-protected rights (same as your personal contributions) and all the rules attached specifically to protected rights will be gone. That means greater death benefits and income options.

Do I then to start to build up S2P in my remaining years working as well? How does that work?

yes. That is until it is abolished which is a current proposal in early stages where a single state pension will replace it. until then you will get a basic state pension and a state second pension (based on your contracted in years) and the personal pension (based on your contributions and contracted out funds).

Crashtogether

I am currently contracted out and the money goes into my private pension. I understand that from April 2012 I will be back being contracted in.

is there another way that i can be contracted out as i know that the rules are different for some types of schemes? my contract of employment says that there is no contracting out provision in place by my employer.

I'm 27 and would preferably want to stay contracted out for now.

Paul_Herring

Crashtogether wrote: »

I am currently contracted out and the money goes into my private pension. I understand that from April 2012 I will be back being contracted in.

Everyone will be 'contracted back in.'

is there another way that i can be contracted out as i know that the rules are different for some types of schemes?

No - not in the way the current scheme works, in that the government refunds you some of your NI.

The closest existing scheme is possibly salary sacrifice where you don't pay the NI to begin with, but will require co-operation from your employer (who may, or may not, give you their savings on the sacrifice to add to your fund.)