Contracting Back into State Second Pension

Cartaphilus

Sorry to trouble you all. In 1988 I worked for Merseyside Ambulance Service. To cut a long story short, I was cajoled by two representatives from Prudential to opt out of my NHS Superannuation Scheme and take out a Personal Pension with the Pru which, unfortunately, I did. In October 1989, I had an Industrial Accident which finished my career and had to retire on ill health. I received a lump sum of £4000 and a monthly pension of £168.
I contacted Prudential and was informed that my pension would be cancelled as you cannot pay into a personal pension with unearned income. I realised the mistake I made by ignoring the advice from colleagues and following the ‘Dollar Signs’ in my eyes.
I began to feel I’d been conned and wrote to Prudential informing them that I felt I’d been mis-sold a Personal Pension. Anyway, after various solicitors letters et al, in 1998 The Prudential eventually admitted responsibility and offered £95000, £40000 of which was a lump sum, and the rest, they said, had to be used as an annuity. Following their advice, and because of my ignorance in the field, I left it in their hands. I was to receive, for life, £3400 payable on the 19th December each and every year.
Recently, I have received a letter informing me that I need to make a decision about my Contracted-Out State Pension? They state that there is a high risk that I will be worse off if I remain contracted out of the State Second Pension and talk of rebates by the Government being cancelled and that I should contract back in. But how can I contract back in if I’m unemployed? Furthermore, I never received a rebate from the Government because I was not entitled to one.
The bottom line is...what do I do?

dunstonh

On paper you are still contracted out but because you never contracted back in. However, as you werent working, no rebates we being paid to Pru and you werent losing anything by not being contracted in. You may as well contract in just to ensure you dont get bugged with a letter like this every year until contracting out ceases (expected to be around 2012-2015)

Whilst the advice was clearly wrong, you do have to remember that even the Govt were telling everyone at the time to contract out and move their pensions to personal pensions and giving a bonus for doing so. The advice wasnt given with malice. They just didnt know any better. So, were not conned out of anything and because of regulation, you got redress for the mistake.

Cartaphilus

Thanks very much for the info Dunstonh. You're dead right. I apologise for using 'conned' having re-read it, it does seem too strong a word to use. But I was, and still am, a bit miffed. Yet, would I be doing myself a disservice by NOT opting back in? The Pru have told me that if I wanted to I could take the money that is outstanding, about £1500, if I did...would this strongly affect my finances when I am 65? If I do opt back in...what will happen to the money?

CrazySaver

dunstonh wrote:

On paper you are still contracted out but because you never contracted back in. However, as you werent working, no rebates we being paid to Pru and you werent losing anything by not being contracted in. You may as well contract in just to ensure you dont get bugged with a letter like this every year until contracting out ceases (expected to be around 2012-2015)

Whilst the advice was clearly wrong, you do have to remember that even the Govt were telling everyone at the time to contract out and move their pensions to personal pensions and giving a bonus for doing so. The advice wasnt given with malice. They just didnt know any better. So, were not conned out of anything and because of regulation, you got redress for the mistake.

Do you have any more info on what changes the government has made to the rebates or are looking to make, any good links you can post. Thanks.

Paul_Varjak

Sorry, but I know little about pensions but one thing sprung to mind!

I do not work (because of a disability) but, since 6 April 2002, I qualify for an additional State Pension through the State Second Pension because I get long-term Inacapacity Benefit.

Would the same apply to you? And would you have to be contracted-in to benefit?

dunstonh

link to some information on what is coming

http://www.watsonwyatt.com/europe/pubs/pensionfilter/?ID=16621

Cartaphilus

Paul_Varjak wrote:

Sorry, but I know little about pensions but one thing sprung to mind!

I do not work (because of a disability) but, since 6 April 2002, I qualify for an additional State Pension through the State Second Pension because I get long-term Inacapacity Benefit.

Would the same apply to you? And would you have to be contracted-in to benefit?

I think it does, Paul. That's why I was wondering what would happen to the cash and whether I'll be missing out? Oh! By the way, thanks Dunstonh!
Cartaphilus