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Should i cotract in or Out??
Options

edmond
Posts: 292 Forumite


i have a pension with a bank which i no longer pay into,(roughly about 4-5k
i cannot transfer this pension, or if i decided to it would cost me more than its worth,
i have decided to keep the pension and take whats there when im 50.
the bank have been in touch with me asking if i want to contract in or out,
i have read the panflets which can with the letter and i an still unsure,
can anyone advise?
i cannot transfer this pension, or if i decided to it would cost me more than its worth,
i have decided to keep the pension and take whats there when im 50.
the bank have been in touch with me asking if i want to contract in or out,
i have read the panflets which can with the letter and i an still unsure,
can anyone advise?
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Comments
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See here. It is the sticky thread near the top of the page (currently misspelled title but getting any help from the moderators around here is impossible!)
Personally I would suggest that EVERYONE contracts in, but there are others that use some flawed statistics to try and convince people otherwise.
Over to you Dunstonh!0 -
LOL.
If you are not going to be 50 by year 2010, you will not be able to take the pension until age 55.
Contracting in/out is currenly cost neutral. In other words, it is expected to be no worse/better contracting out than it is contracting in. So, it then comes down to attitude to risk. If you are low risk or invest in low risk/low potential funds, you should contract in. If you invest in funds with higher potential and accept that fund performance may or may not improve on the contracted in benefits, you may decide to contract out. Looking at these circumstances alone, most would contract in as that is the guaranteed option.
However, like many things, there are a couple of points to consider which may sway you one way or the other.
1 - From April 2006, you will be able to take 25% tax free lump sum from contracted out pension funds but not when you contract in. (subject to legislation being passed and no change of mind)
2 - From April 2006, you will be able to take contracted out benefits from age 55 but with contracted in benefits, it will remain 65 or whatever the state pension age increases to in the future. (again, subject to legislation...).
3 - Next point is a matter of opinion. Some would rather have the contracted out pension in their name rather than have it with the Govt. The idea being that if it is in your name, you have the money. If its with the Govt, they could decide to remove that benefit. That is extremely unlikely although not impossible. So that is an individual decision to make.
4 - Timescale, the younger you are the more likely contracting out is to be beneficial than it would be later in life.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
edmond wrote:i have a pension with a bank which i no longer pay into,(roughly about 4-5k
i cannot transfer this pension, or if i decided to it would cost me more than its worth,
i have decided to keep the pension and take whats there when im 50.
the bank have been in touch with me asking if i want to contract in or out,
i have read the panflets which can with the letter and i an still unsure,
can anyone advise?
do you still work for the bank? if not then contracting out wouldnt apply as you dont have your wages paid by the bank.... if you do still work for the bank........ see other postings
are you paying into any pension fund?smile --- it makes people wonder what you are up to....:cool:
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sorry
i dont work for the bank, i have a pension with a bank.
i work for the council, who i have a pension with,
i pay into the council pension, but not the pension i have with the bank0 -
You are almost certainly contracted out anyway then, as part of the Government scheme that you are in. I believe that they are all contracted out. Check the scheme booklet for your scheme.
Dunston states frequently that contracting out is broadly cost neutral. The analysis that my company has carried out shows that this is not the case, and is most definitely not the case as each person gets older. In practice it depends very much on the assumptions you use, and I suspect that my assumptions are far more conservative than Dunston's!
Certainly I would not suggest that anyone over the age of 35 should be contracting out, and anyone below that age must appreciate that they "may" lose out by doing so.
It simply isn't worth the risk in my opinion. Most people do not have the investment knowledge or skills to make use of the contracting out rebates, and they fail to buy decent annuities when they retire.
I will restate my opinion on this subject: If you have to ask whether it is wise to contract out, you almost certainly shouldn't!0 -
Pal wrote:
I will restate my opinion on this subject: If you have to ask whether it is wise to contract out, you almost certainly shouldn't!
does that still stand in my case..... i have been contracted since i was 18 (approx) and started paying into my pension, I have even checked with the pension department and confirmed that my serps (or what ever it is now) pot is empty.... I am 39........and still contracted outsmile --- it makes people wonder what you are up to....:cool:
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I will simply restate my opinion: If you have to ask....0
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Dunston states frequently that contracting out is broadly cost neutral. The analysis that my company has carried out shows that this is not the case, and is most definitely not the case as each person gets older. In practice it depends very much on the assumptions you use, and I suspect that my assumptions are far more conservative than Dunston's!
I base my view on the ABI who stated it was cost neutral. I personally have research of my own to have a different opinion. When i do contract someone out, I usually do it on nil initial commission basis when its attached to a ordinary rights pension. This would favour contracting out more than a commission paid pension.
I would just also add that this thread is the perfect example why financial advice cannot be given via a forum. Each post the OP made would result in a different "advice" answer.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Regardless of what the OP decides about his contributions from now on, what he does need to do is to check out what is happening to the money he has alresdy got in the contracted-out pension plan, which will stay there, whatever his decision.
Where is it? What's it worth now? What funds is it invested in - are they any good? Should the money be moved? Where to - new funds at the same company,or to a new company entirely? What charges is he paying?Can he get them lowered?Would there be penalties for moving the money?
This may sound like a lot of hassle, but if you have several small pensions dotted about, it may be wise to sort them out and get them invested properly for the long term so they are not wasted.Trying to keep it simple...0 -
two things to consider about contracting in/out
1. you pay more in national insurance contributions (if contracted out the company and the individual pays less national insurance contri's as an incentive to add to your pension plan)
2. if you contracted in, then you would qualify for SERPS/S2P, the second state pension whatever want to call it. Will this still be available by the time you retire, and given this governments tendancy to mess about with pensions can you trust them to leave revaluations etc alone?!
(can you tell I work in pensions!?!)G/C Mar 2014 - £18.50 / £350 NSD 0/290
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