Should I go back to serps???

pencil

I am 38 and have been out of serps I think from the late 80's. Maggie made it seem like a good idea. The pension that the contributions are going too is a paid up policy now. I earn less than 20k a year and so I guess that I am a low earner (only the boss will disagree!). I have nearly 30years of working life left and so if it best to go back in am I too late for it to be worth it?.
My endowment went down the pan a few years ago will my sp2 contributions be doing the same? can I find out?

Thanks in advance for all advice

grey_lady

Didnt the government send out leaflets about a year ago basically warning everyone to go back in? course they might have a vested interest :-)
but i fell for it and went back in. Be good to get some debate going about this.

dunstonh

The Govt wants everyone contracted in because they dont have to pay the rebate now which saves them millions of pounds a year in the short term. Although it will cost the Govt even more over the long term. The reduction in rebates has turned out to be a bit of a stealth tax.

At this moment in time, about 1/3rd are financially better off by being contracted out. Thats improvement from around 2001/2 when no-one was but worse than in 1996 when everyone was better off contracting out. Obviously, the stockmarket crash had a lot to do with that.

Going forward, if you wish to remain contracted out, you have to be looking at a decent investment spread with the aim to achieve at least 3% p.a. above inflation over the long term (really rough guideline). If you dont want to invest in areas that have that sort of potential, then you should consider opting back in. However, there are some advantages to contracting out (such as 25% lump sum and ability to take benefits before state retirement age) and there are some risks with contracting in (govt has already reduced contracted in benefits 3 times and a 4th is on the cards with the increase in state retirement age). So, you need to make sure the option you go with is right for you.

When Mrs Thatcher introduced it, it was a good idea. A combination of events, in particular the reduction in rebates from this Government, have made it less attractive for many. Around 2012, you wont get the choice anyway as there are plans (which may get put back a year or two) to abolish contracting out through personal schemes.

jamesd

What is your pension invested in? That's the key to how much your pension will be worth. If you don't check this, you're much less likely to be better off by contracting out because you're less likely to be in and stay in high return investments.

You're not a low enough earner for that to be a big factor. You do have a long time until retirement so as long as you choose good investments in your pension you should be able to do significantly better than you will by opting in.

wotsthat

Once you get the rebate from the Government it's yours to keep (with restrictions on what you can do with it).

If you decide to opt in then you are trusting whatever Government is in place when you retire to honour their promise to provide a S2P.

I thought the Government was working towards providing a pension for all which was above the current pension credit limit (c£114/ week?). They may decide that by doing this they don't need to offer the S2P as well.

The maths are irrelevant if you think, like me, that S2P will be but a distant memory in 25 years time. I'm taking the money now.