Opt out of SERPS/S2P?

Paul_Herring

Strictly speaking not an opting out of SERPS/S2P question so should be in its own thread, but...

souperstar wrote: »

I have a bit of a dilemma in which I don't know whether it is worth the hassle for me to opt into the Work Pension next year when the new rules come into play. I will be 55 and also think that the company will be folding in about 5 years. I have two private pensions, one of which is frozen. How much more monthly benefit would I gain from opting into the work pension for 5 years?

Two factors:
1) How much money over and above your 'net' contribution will be ending up in your pension pot? e.g if you put in 1% and your employer puts in 1%, you'd be foregoing that second 1% (along with any tax-rebate on your contribution, but this may be moot since (apart from the 25% tax-free lump sum) it will likely be taxed on the way back out.)

2) Are you prepared to 'chuck away' that extra money? (If it's a piddling amount you may think it's not worth the hassle of yet another pension.)

dunstonh

I have a bit of a dilemma in which I don't know whether it is worth the hassle for me to opt into the Work Pension next year when the new rules come into play.

This thread is about contracting out of SERPS/S2P. It shouldn't be stickied anymore as that was abolished in 2012. So, you cant do it.

How much more monthly benefit would I gain from opting into the work pension for 5 years?

Would depend on the terms of the pension. However, irrespective of the type of pension, it will be better than any alternative due to employer contributions or part paid for benefits. So, if you were just going to put the money in a savings account and draw from that in retirement then the pension would wipe the floor with that. Even if the amounts are not that great due to short timescale.

Free money from employer should not be turned down.

KiNeL

dunstonh wrote: »

I was contracted out in the past and it has turned out to be the best thing I ever did.

Same here, I was contracted out from the outset and remained so despite exhortations from the insurance company to contract back in.

It's allowed me to retire early (to France) and after the 25% TFLS the balance of MY MONEY from my contracted out SERPS into a QROPS from which I take an annual drawdown but more importantly if I die before my wife the money is hers and when she dies it goes to our estate.

Along with 2 full UK state pensions (still 20 months to go for mine) we will be quite comfortable and happy in the knowledge that at the end of the day when the lights have gone out for both of us the money will go to our kids and not some grasping insurance company.

Oh look, it's nearly time for my early evening G&T :beer:

Paul_Herring

KiNeL wrote: »

Oh look, it's nearly time for my early evening G&T :beer:

I'm sure France isn't that far ahead of the UK O_o

KiNeL

No, only an hour but I like to start a bit early in the Winter

Besides the wife is out :rotfl:

dunstonh

bd123 wrote: »

If you opted out of SERPS and have more than 10k, the guys at SPAM can assign you a locally based IFA to come and see you free of charge to get some solid advice.

This is a lie and not possible. It is an unethical way to get a fee as it is not free. The fee would come from the pension pot (there is no commission any more either. it has to be an explicit deduction from the pot if you are not paying by cheque).

The spam post also breaches the FCAs guidelines on financial promotions. So, please do not place business with firms that lie and breach regulations to obtain business. If they are doing it at that stage, what other lies and unethical activities would they also be doing with your money?

Eastlands70

I'm pretty sure this question will have been raised at some point on here so apologies in advance.


Way back when I started my first office job in 1989, on the very first day I was offered the chance to opt out of SERPS which I did. About 7 years ago I opted back in, on the advice of Zurich who at the time were the pension company looking after my funds (and still are to this day).


I've signed up to request an up to date pension statement from the government's website. I'm still waiting for the activation code but basically I'd like to know the following:


Now that I'm contracted back in, is there an option for me to pay extra contributions towards my S2P to make up for the shortfall during the years I was contracted out? With me being contracted out between 1989 and 2007 I'd imagine the shortfall will be quite significant so could do with giving my S2P pot a boost.


Thanks in advance.

greenglide

If you reach SPA before 6th April 2016 you will have a chance to buy additional units of AP to increase your state pension.

If your SPA date is after 6th April 2016 then you cannot buy additional years of S2P.

If your pension forecast is over £147 or so then your foundation amount will be above the level of the STP state pension.

If it is less and you will possibly not have sufficient years to reach 35 years of contracted service then you may never qualify to get the full £147 amount, this depends how the deduction for contracted out periods is calculated (government hasn't decided yet).

Look here [FONT=&quot]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf[/FONT]

Paul_Herring

Eastlands70 wrote: »

Way back when I started my first office job in 1989, on the very first day I was offered the chance to opt out of SERPS which I did. About 7 years ago I opted back in, on the advice of Zurich who at the time were the pension company looking after my funds (and still are to this day).

I'm guessing you're around 41, having worked for 24 years already, and have at least another 25 years left before (state) retirement. That'll work out at much more than the 35 years minimum of qualifying years (which, when employed, are the opted-in years) required to obtain the whole of the single tier pension - I don't think you'll need to top up anything, since you'll naturally acquire the requisite contributions.


You may want to wait for a more qualified person to come along and confirm any of that however, and feel free to correct any of my assumptions in the meantime.

dunstonh

With me being contracted out between 1989 and 2007 I'd imagine the shortfall will be quite significant so could do with giving my S2P pot a boost.

I would have thought the opposite if you are in your 40s and the additional state pension being abolished in 2016. With around 25-30 years to still work plus, the 7 you have had already in, then you would more or less qualify for full entitlement. Plus, you get the contracted out pot to keep as well.