what is it all about......

The_Economist

Hi all bit off a long one.
Right years ago started a private pension and opted out of SERPS. Then lost job and done a bit then got new job and joined company pension. Then company pension decided to opt out off SERPS so now my NI rebates is being paid into company pension. With all thats going on in the pension world at the momment i would like to OPT back into SERPS but i dont think company pension will allow this on an individual basis. I think this is wrong as when i started off in the pension they had'nt opted out. Then all of a sudden they had. I want to stay in the company pension but want more freedom on opting out or in. Does anyone Know how i stand.....

dunstonh

contracting out with an occupational pension means something different to contracting out with an appropriate personal pension plan.

The occupational scheme almost certainly will not allow you to contract back in. (assuming it is a full occupational scheme and not a group personal pension).

The_Economist

Hi dunstonh. It is a full occupational pension scheme. The reason why i am trying to find out about contracting back in is because if anything happens to the company i.e it goes bust, do I/ we lose everything that has been paid into the pension via our NI rebates. So when we come to retirement age could we lose out on the state pension.

jamesd

You can't make an invdividual choice in the occupational scheme. You do lose the contributions going to the S2P, formerly SERPS, but not from your past years contracted in. You don't lose the basic state pension. After the troubles in recent years a guarantee scheme was introduced, as was additional monitoring for company pension schemes via the Pensions Regulator. Both of those should help to protect most of the benefit you'll get from the occupational pension.

If your company scheme is a defined benefit, final salary, scheme the guarantee is the Pension Protection Fund.

Otherwise you may be protected by the Financial Assistance Scheme if you're within 15 years of retiring. Best to read that page and check the limitations as well as ensuring that your employer's scheme is registered.

One recent change to occupational pensions is that you do have the option of paying into your own personal pension in addition to the company scheme. If you don't trust the company scheme this is one option after you've contributed enough to the company scheme to qualify for all the money the company will add itself. Previously your only option was additional voluntary contributions (AVCs) to the company scheme.

The Pension Advisory Service might be one place to go with questions. It happens that I phoned them myself yesterday and I found them as helpful as they could be given what I was asking about.

The_Economist

Thanks for your reply jamesd.

david78

When you contract out using an appropriate pension plan, you pay full NI and some of this is rebated into the plan (your employer may or may not know of your arrangement).

When you contract out using a company pension, you pay reduced contributions (your employer knows).

So in the latter case you should be able to afford a bit of money (full NI - reduced NI) to pay into a personal pension. You can't get back into S2P though without leaving the pension scheme.

Milarky

david78 wrote:

When you contract out using an appropriate pension plan, you pay full NI and some of this is rebated into the plan (your employer may or may not know of your arrangement).

When you contract out using a company pension, you pay reduced contributions (your employer knows).

So in the latter case you should be able to afford a bit of money (full NI - reduced NI) to pay into a personal pension. You can't get back into S2P though without leaving the pension scheme.

Yes, and bear in mind that your employer's arranagement (the reduced NI) only represents the SERPS 'level' of contracting out (the lower light green 'wedge': "SERPS" in the chart below)- which you no longer recieve from the government . The difference between SERPS and S2P (the dark green 'slither': "Excess of State Second Pension over SERPS") is still credited to you as a top-up element to the basic state pension and will get paid to you directly.

The_Economist

david78 wrote:

When you contract out using an appropriate pension plan, you pay full NI and some of this is rebated into the plan (your employer may or may not know of your arrangement).

When you contract out using a company pension, you pay reduced contributions (your employer knows).

So in the latter case you should be able to afford a bit of money (full NI - reduced NI) to pay into a personal pension. You can't get back into S2P though without leaving the pension scheme.

So doing it through a company pension i assume is better than doing it through a private pension. I understand now that i cannot opt back in because of being in the company pension. So is this less risky?

The_Economist

Milarky wrote:

Yes, and bear in mind that your employer's arranagement (the reduced NI) only represents the SERPS 'level' of contracting out (the lower light green 'wedge': "SERPS" in the chart below)- which you no longer recieve from the government . The difference between SERPS and S2P (the dark green 'slither': "Excess of State Second Pension over SERPS") is still credited to you as a top-up element to the basic state pension and will get paid to you directly.

Sorry bit confused now. What do you mean buy top-up element to the basic state pension.

Milarky

The_Economist wrote:

Sorry bit confused now. What do you mean by top-up element to the basic state pension.

Just that - an additional payment over and above the 'flat line' (representing the 'basic state pension' - £84.25pw) in that diagram. As david78 pointed out the two forms of 'contracting out' are quite different really. But being stuck in the employer's scheme (and paying a bit less NI yourself) you are effectively only partially 'contracted out' as regards the 'State second pension' (S2P). The depth of the dark green bit compared to the depth of the pale bit at the bottom gives you a guide of how large that payment could be at each level of income. (make sense?)

A word of caution though: The graph is potentially misleading. After 2010 they will be putting people on the full basic (£84) who have only 30 years qualifying - so a 50 year old could qualify by that age - but the payment will still be from age 66,67 or whatever. But that top-up slice of the diagram - the 'state second pension' - composing bits from your employer plus a bit from the state too - is based on a full 50 years payment of NI - and would be scaled back the fewer actual years you have contributed by retirement. What I'm saying is to be aware that pension rights have not in the past (and will not in the future) build up smoothly or at the same 'rate'.

It's basically all voodoo anyway so I apologise if your eyes are swivelling at this. But I hope you a getting a picture of what is going on regarding your various entitlements also..

EdInvestor

It might be helpful to know what you are in line to get in the way of BSP+ S2P now.

Get a forecast here:

https://www.thepensionservice.co.uk