SERPS pension losses

thehorologist

Thanks again. you have identified the company from whom I extracted the quote. I had no idea that this matter has already been investigated. I must be one of the unfortunate 1.5%.
I am not sure what questions I have left unanswered except to say I am current;y in good health all other relevant information is I think there.
I have written to the Insurance Company and NI Contributions office and await a reply. Failing that I will in future be cautious about accepting any finacial advice government or otherwise.

dunstonh

I must be one of the unfortunate 1.5%.

If you were over the age of 45 in 1987 then fall under that 1.5%. If you were under the age of 45 then you were not. That is effectively that the flow chart says.

I am not sure what questions I have left unanswered except to say I am current;y in good health all other relevant information is I think there.

With the open market option you have said an income of £18.69. Is that after the tax free cash has been taken or before?

thehorologist

Thanks again, in 1987 I was under 45 (1987 minus stated birthdate 1946 = age 41) THIS IS THE DATE I WAS ACCEPTED INTO THE SCHEME so was under 45 at that time.
by 1994 I was 48 (1994 minus birthdate 1946 = age 48) THIS IS THE DATE I WAS FIRST MADE AWARE OF A POTENTIAL PROBLEM and I acted promptly and returned to SERPS. The advice at THAT time was that males over 45 would be unlikely to benefit so I opted back.
The income quoted of £18.69 is arrived at by apply the total insurance payout of approx £17,000 (no cash withdrawal) and was arrived at using Money made Clear and was a better figure than quote by my insurance company. Even so this best fiqure nowhere near matches the figure being deducted from my state pension or compensates for the loss of future state increases. (being a flat rate.)

dunstonh

there is the FSA guide. It was first published in 2008 and reprinted in June 2009. I don't believe the FSA publish it anymore as it turned into such a non-issue.

http://webarchive.nationalarchives.gov.uk/20100210151716/moneymadeclear.fsa.gov.uk/pdfs/s2p_wrongly_advised_ink.pdf

in 1987 I was under 45 (1987 minus stated birthdate 1946 = age 41) THIS IS THE DATE I WAS ACCEPTED INTO THE SCHEME so was under 45 at that time.

So you are not in the 1.5% failure group.

by 1994 I was 48 (1994 minus birthdate 1946 = age 48) THIS IS THE DATE I WAS FIRST MADE AWARE OF A POTENTIAL PROBLEM and I acted promptly and returned to SERPS. The advice at THAT time was that males over 45 would be unlikely to benefit so I opted back.

Again, all correct and fine. The rebates didnt start getting reduced that much until 1997. So, the age 45 guide is the lower end of the scale. I remember seeing "pivotal" ages being into the 50s in the earlier 90s. So, being told to contract in at 48 in 1994 is exactly what you would expect.

So bottom line is that you appear to have no issue.

How often did you review the investments in that period since 1987?

benny5

jamesd wrote: »

DWP will present it as a deduction from the amount of additional state pension that is payable.

Out of interest, is this information only provided when ‘final’ pension figures are generated.

I ask this as my pension 'projection' details the basic pension together with my SERPS/SP2 entitlement with a comment that I am building up additional state benefit (my op out period). No mention of any adjustment for the latter.

jamesd

I think it's not shown in that way until pre-retirement statements are issued.

Like you what I get in state pension forecast is an income amount which is higher or lower depending in part on whether contracted out at the time the forecast is generated.

jamesd

Here's what current guidance from the official Pensions Advisory Service says about when someone should consider contracting back in:

"Shouold I continue to be contracted out?

Your decision as to whether to contract in or out should be reviewed regularly. As you get older, the additional state pension may appear more attractive as there is less investment time for your contracted out rebate to grow. Many commentators currently hold the view that contracting out is not good value for most people and some insurance companies and banks have advised all their contracted out policyholders to contract back in. Others take the view that there is a break-even age, below which they recommend contracting out and above which they do not. There are a range of ages used as this break-even age. For women the age range is usually 40-45 and for men it is 45-50. In reality it is impossible to say that someone will definitely benefit by being contracted out. However, age is not the only factor. People's circumstances and attitudes to risk change and therefore there may be other factors in the future that will be more important to you. One particular issue may be future changes to the additional state pension itself and therefore it is important to review your decisions at regular intervals."

So you were below the top of even the current general age-based recommendation to contract back in when you did it. Apparently the pension company you were using chose to be quite cautious in telling people that they wanted people to contract back in.

benny5

jamesd wrote: »

I think it's not shown in that way until pre-retirement statements are issued.

Like you what I get in state pension forecast is an income amount which is higher or lower depending in part on whether contracted out at the time the forecast is generated.

Thanks Jamesd.

That helps to reassure me; that is if anything relating to pension planning can be reassuring.

Benny.

thehorologist

dunstonh wrote: »

No. Some claims companies thought so a few years ago but the FSA looked into it about 4 years back and found a failure rate of just 1.5%. that is very low. The FSA also issued a flow chart that made it easy to identify those 1.5%. Since then virtually all the claims companies stopped looking at it other than a few scam companies or those that use it as an excuse to allow them to transfer the pension to something else (And earn around 5% of the value by doing so).

[TEXT DELETED BY FORUM TEAM]

So what happened to the !.5%, did they get compenstaion?

thehorologist

jamesd wrote: »

Yes, more can be deducted than the amount you get from investments. If you get more from the investments the deduction doesn't increase.

You do have some good options, though:

1. Wait until next year. You'll be able to buy an annuity with fewer restrictions because the distinction between protected rights and other pension pots is being eliminated from April 2012. No need for one with 50% spouse benefit or RPI inflation protection after this. If you are female you may gain from the requirement to offer annuities that do not use gender as a factor but it'll take a while for that to work through the annuity quotes. If you are male you might gain from losing the requirement to buy an annuity at unisex rates but that court decision could eliminate this.

2. Use income drawdown instead of buying an annuity. It looks as though your pot is around £30,000 or so from the income numbers given and that's just about reasonable for drawdown using an inexpensive provider. Income drawdown requires an understanding of investments or use of an IFA to manage the money. You've demonstrated less than good investment performance and the amount is probably too low for an IFA to be interested, so this may not be a realistic option for you.

3. If you have anything that could affect your health, like being overweight or smoking, discuss an annuity with an IFA because you can get higher annuity income than with standard annuities that assume good health. You may need to wait until next year to benefit most from this because of the current requirement for a spouse benefit.

When you contracted out you took responsibility for that part of your pension and the state has no further obligations with respect to it. You were the person responsible for making the investment decisions and taking the gains or losses associated with those investment decisions. If you didn't pay any attention to it and make any investment decisions, that's unfortunate for you but it was still your responsibility. At the time when you were contracted out just about everyone should have done better from contracting out than staying contracted in. The failure to do that in your case is due to the investments and pension company that you chose to use. Unfortunate for you but those are the facts.

Thanks for the reply which I have been considering:

1: It looks as though I might benefit by waiting until April 2012 before using my total £17,000 pot to by an anunity. This might at least match the Contracted out deduction which current exceeds any anuity I can buy. Of course I will loose out 6 months annuity payments whilst the COD deduction will still be applied.
Will the COD deductions remain static once the anuity is in payment or will it rise with the notional SERPS pension I could have aceived if I had not opted out?

2: You are quite right, my pension pot of £17,000 is of little interest to an IFA and income draw down is not an option.

3: I have no current health problems that would help and again no advantage in consulting an IFA.

4: You say that at the time I contracted out I took reponsibility for that part of my pension. IS this really the case? or was I bamboozeled by the information presented to me at the time which gave every indication that I would be better off opting out. Being a reasonable person I accept an element of investment risk and my choice of insurance company may not have been the best (although I have no eveidence that any other would have faired better) What I did not expect (and did not realise until recent months) was that the "goverment" agency can deduct more from my state (earnings relatede pension) than my investments acheive.
The senario is; Government 1987 "Here is an opportunity to better your SERPS pension and we will even give you tax incentives".
Government 2010; "sorry you opted out with OUR help, TOUGH it did't work out, but just to rub your nose in it we will deduct the ammount you would have earned if you had ignored our scheme!"

Far from being a lazy investor, I have checked the staements from my insurance compnay and had no cause for alarm. What the statement did not say was what pension could have been acheived in the state SERPS scheme. Naturaly I would not expect the insurance company to post comparative result but even if they had what options were left to me?

So the state takes no responsibility, they have now replied to my letter indicating just that and the Insurance company have not even had the courtesy to acknowledge my enquiry. Based on the informaion you have kindly supplied I have the option to take the highest anuity now or wait until April 2012 in the hope of a better deal?
regards Chris