future plans re: SERPS and Personal Pensions

Mojo71

Hi,

Just read something that caught my eye regarding future plans about SERPS and Personal Pensions.

http://www.h-l.co.uk/news_and_expert_views/expert_views/articles/680/rq/article.hl

Specifically, the last sentence says "S2P is going to be restructured over the next few years, and the option to contract out via a personal pension is going to be withdrawn".

Can anyone explain in more detail what this is going to mean? Is SERPS being withdrawn? If not, then does that mean people (like myself) contributing to a personal pension with my own contributions, plus those from my employer, are going to be required to start up a new pension scheme?

Background info if needed: I'm 36, have been paying into personal pension for about 18 years, first with Canada Life (recently highlighted for extremely poor performing funds) and currently with Norwich Union (not a great deal better in my opinion, as my own investments have done much better). Currently stuck with NU purely because employer won't pay monthly contributions to another scheme that they haven't chosen, but at least now taking bull by horns and transferring majority of accumulated money into a SIPP (can't transfer protected rights amount). In my opinion, SERPS has at least provided extra "free" money into my funds, so at least that can go towards what I might have "lost" in average performing funds.

Thanks in advance for any info...

jamesd

The existing protected rights (contracting out) money will remain yours to control. The contracting out rebate is to be eliminated for money purchase pensions (including personal pensions) but not final salary pensions sometime after 2010. You won't need a new pension but will be contracted back in without choice.

In effect the S2P payments will become a pension contributions tax on those of average and higher incomes to produce higher pensions for those with very low incomes, as S2P gradually changes to become flat rate.