government automatically contracting me into ssp

jimnew

the government are automatically contracting back into the ssp this year.

i am right in believing the contributions i have in my pension are a 100% mine or can they claim them back

i was contracting out for about 20 years is there any thing i should do?

dunstonh

the government are automatically contracting back into the ssp this year.

Correct. Contracting out is being abolished in April.

i am right in believing the contributions i have in my pension are a 100% mine or can they claim them back

With the Govt reclassifying them as non-protected rights, it would be near impossible for them to claim them back within just a few years. It would also require primary legislation and serve little purpose and create more damage than good (could you imagine the effects on the stockmarket and bond markets if you suddenly had billions taken off them? However, theoretically it is possible.

i was contracting out for about 20 years is there any thing i should do?

Same as usual. Review your pension contract and investments within them to make sure they are still correct for you and up to date with modern options.

xylophone

http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/@over50/documents/digitalasset/dg_195031.pdf
might be of interest.

jimnew

thanks the link was helpful

is there any need to top up the ssp for the years i have not paid in to the government fund

jamesd

There's no need and no way to top them up. Your investments in the contracted out pension pot are what are supposed to replace them.

All of this is a completely different thing from the basic state pension. The years where you were contracted out of SERPS and S2P didn't contract you out of the basic state pension and still count towards the 20 years needed to get a full basic state pension.

The reasons given in the link are somewhat misleading. The real reason for eliminating contracting out is that the earnings-related S2P is to gradually become flat rate, not earnings-related, as a subsidy from high earners to low earners. That would cause more average and high earners to want to contract out. So the option to contract out is being withdrawn to force people to have their earnings-related contributions subsidise those of lower earners.

hugheskevi

The real reason for eliminating contracting out is that the earnings-related S2P is to gradually become flat rate, not earnings-related, as a subsidy from high earners to low earners. That would cause more average and high earners to want to contract out. So the option to contract out is being withdrawn to force people to have their earnings-related contributions subsidise those of lower earners.

Rebate rates are reviewed every 5 years, so that they reflect the value of the benefit foregone, so there would not be an incentive for average and high earners to want to contract-out just because the system gradually flat-rates.

Rather amusingly (and doubtless expensively...), the Government Actuary's Department had to make recommendations about future DC rebate rates for 2012-2017 even though contracting-out for DC schemes is being abolished (quirk of the legislation requirements). They concluded on page 82 of this report:

3.24 The rebate rates at each age have fallen. The fall ranges from around 20% at the youngest ages to 3% at the oldest ages.

jamesd

Factor in a £140 a week combined state pension and see what that does to the required rebates to match the benefit foregone... You're right that they could lower the rebates, though.

Interesting that the GAD seems to have felt that the value of the benefit foregone was dropping.