Op out SERPS head out of sand

dancemum

Hi

I opted out of SERPS in 1989/90

I worked until May 2002 when I was very ill and pregnant. I haven't worked since. I have 2 children (10&16) with special needs and have been looking after them.

I received a statement saying my fund is 3/4 AP 284.14units £24,219.50. They say this will = £23 approx a week. Is this all I will get? I can't work at the moment due to being a carer.

I tried to get advice a few years ago but the guy just tried to sell me more products. I haven't opted back in. I thought I would have some entitlement due to being a carer.

I do have a working husband. Small Mortgage and life insurance.

I'm poking my head out of the sand to try to understand this.

Tancred

You should never have opted out of SERPS - terrible idea!

2sides2everystory

Tancred wrote: »

You should never have opted out of SERPS - terrible idea!

So we have finally come around to the conclusion that more or less all SERPs policy sales were mis-sales just like PPI except with SERPs it took us longer to realise?

What template letter do we need to fill in for this one then, Tancred?

dunstonh

I haven't opted back in.

You contracted back in during April 2012. However, you havent really been contracted out since 2002. You have to be employed and paying class 1 NI. You havent been.

So we have finally come around to the conclusion that more or less all SERPs policy sales were mis-sales just like PPI except with SERPs it took us longer to realise?

SIB did a review of contracting out in 1996 and found everyone contracted out prior to that date was financially better off. FSA did a review of the sales of contracting out and found the possibility that 1.5% of sales could have been mis-sold. So, 98.5% were not mis-sold.

Contracting out is generally benefit neutral. Some may get a little less. Some a little more. I read a report that said the average difference was just +/- £1.50 per week.

The early years were better but when Labour got into power they reduced the rebates (stealth tax) which made it harder for contracting out to provide a surplus. That pushed the critical age to contract back in downwards. So, if you were under the age of 40 (for women) at the point of contracting out then chances are that it was the right thing to do. The FSA published a flow chart showing this.

You should never have opted out of SERPS - terrible idea!

Why? Best thing I ever did. My former protected rights pot is on track to pay me around 3 times more than I would have got had I stayed contracted in. How is that terrible?

Contracted in benefits were reduced 5 times over the years but never was any attempt made to claw back contracted out benefits.

jamesd

dancemum wrote: »

I opted out of SERPS in 1989/90

That was a good move and almost everyone who did it would have been better off under existing state pension rules. The proposed new rules further increase the benefit of having contracted out.

The state pensions currently consist of two main parts, the Basic State Pension, around £100 a week at the moment, and the Additional State Pension which is related to earnings and accumulates (accrues) for each year when contracted in and working. The amount accrued for the Additional State Pension depends on the income. You don't accumulate any years towards the Additional State Pension when contracted out, instead you got the rebates into your own individual pension.

dancemum wrote: »

I worked until May 2002 when I was very ill and pregnant. I haven't worked since. I have 2 children (10&16) with special needs and have been looking after them.

You would have received up to three years of Juvenile Credits for years to count towards the Basic State Pension. You would also have received credits for each year you were receiving Child benefit.

Assuming the children are not children now you probably have at least 19 years towards the 30 required to get the full Basic State Pension under current rules. You can buy additional years and you should get a State Pension Statement to check how many years you have currently accrued.

dancemum wrote: »

I received a statement saying my fund is 3/4 AP 284.14units £24,219.50. They say this will = £23 approx a week. Is this all I will get?

No, you'll get some Basic and Additional State Pension as well.

The changes to a single rate pension that have been proposed this week will make people in your position better off, assuming you won't be reaching state pension age until 2017 or later. Under those proposals:

1. You'll get credited for all years that counted for the basic state pension and will get (£144 * that many years) / 35 as a base amount, less an allowance for years contracted out. Then they will calculate the amount under current rules and if that's higher you'll get that as the base amount instead.
2. Those who don't have enough years and those who have contracted out can continue to accumulate years towards the new flat rate pension and its' possible to end up both gaining from having contracted out and getting the full flat rate pension if you have long enough until retirement.

So, get that State Pension Statement and then be happy that you're likely to be one of the bigger winners if the proposed state pension changes happen. How much of a winner depends on how long it is until you reach your state pension age and whether you choose to ensure that you continue to be credited with extra years, by buying them if not working or getting credited for them.