Should i cotract in or Out??

JCL

dunstonh - don't know if you've noticed but the end of your sig doesn't read well:

please seek advice from an Independent Financial Advisor who will can advice you after finding out more about your situation.

EdInvestor

george wrote:

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!?!)

I would agree with this comment - get the money out, you can't trust the Government, except for one thing:many people who are contracted out already are invested in frightful zombie closed With profits funds where their money is wasting away in high charges and crap performance.You can't trust the pensions industry either!

Unless people are willing to take a bit of interest in how their SERPS pension money is invested and what fees and charges they are paying, then history suggests they might as well stay contracted in - after all, the Government can always be influenced by political pressure to provide more later if necessary. There's no comeback at all with the insurance companies

dunstonh

Thank you JCL. It was a bit of a crop, copy and paste. Now corrected.

Pal

Editor wrote:

You can't trust the pensions industry either!

What you describe is an investment management industry problem, not a pension problem.

Unless people are willing to take a bit of interest in how their SERPS pension money is invested and what fees and charges they are paying, then history suggests they might as well stay contracted in - after all, the Government can always be influenced by political pressure to provide more later if necessary. There's no comeback at all with the insurance companies

I completely agree - but I believe that most people do not have the investment knowledge to make reasonable decisions. Most people do not know what an equity or a bond is, let alone why they would want to invest in them, the possible risks, the advantages and disadvantages of active and passive management, how to research and choose a good manager, how to analyse investment performance numbers, how to buy an annuity, what type of annuity to buy etc etc.

Unfortunately I suspect that many IFAs recommend contracting out to individuals because they can get repeat business from the continuing advice that is required going forward.

My main concern about contracting out is that it is a process of opting out of a defined benefit pension scheme into a defined contribution (money purchase) pension scheme. This was exactly the subject of one the biggest pension misselling scandals, and is exactly the type of pension switching that trade unions and the media are regularly up in arms about. Contracting out is a Government sponsored mechanism for achieving the same thing!

I am not against contracting out - I just believe that most people are not in a position to take advantage of it.