SERPS in or out

Twiglet170

Some years back, I can't remember how long, but we had the option to opt out of SERPS. At that time my company (small firm) had someone from Barclays Bank come to the office to tell us how much more beneficial it would be to opt out. So, I did. In 1995 I moved to the US and so my NI contributions stopped. I believe up until that time they were in fact being diverted to Barclays. Despite having been overseas, I have been told that had I not opted out I could have paid up some years to increase my state pension. I have recently been sent a statement by Reassure (who have taken over the plan) and am pretty disappointed by what I see. Is it possible now for me to opt back into the SERPS scheme and transfer what I have with Reassure, plus buy some years to increase what pension I will receive? Or am I stuck with Reassure?

jem16

Twiglet170 wrote: »

Is it possible now for me to opt back into the SERPS scheme and transfer what I have with Reassure,

Everybody has now been automatically been contracted back into SERPS as contracting out has been ended for money purchase schemes since April 2012. However this is for future contributions. You cannot put it back in.

plus buy some years to increase what pension I will receive?

That's a totally different thing. SERPS/S2P is the additional state pension and you cannot buy years in this. You can, in some circumstances, buy years towards the basic state pension.

Or am I stuck with Reassure?

No you can transfer it to any other pension provider if you wish. However remember that the pension is only a tax wrapper. It's the investments inside the wrapper that matter and not the provider of the wrapper.

jamesd

There are currently two main parts to the UK state pension system:

1. The Basic State Pension, currently about £108 a week. Each year of working in the UK or paying voluntary contributions or purchased later counts as one year for this and a person gets full payment after 30 years.
2. The Additional State Pension. This is earnings related and you could opt out of this part, as you did. The amount you get continues to increase for each year of work in the UK, with no cap on how many years.

There is a proposal to replace both of these with a flat rate of £144 a week with some transitional protection and a total of 35 years to get the full £144 a week.

You will have received three years of juvenile credits if not working in your teens. You will have received one year for each year worked until you contracted out. As soon as you left in 1995 you stopped any contributions to either unless you have been paying voluntary contributions.

If you qualify for it you will get the UK pension wherever you are when you reach the UK state pension age. Qualifying under the current system takes 1 year of contributions to the basic state pension, that you already will have, the new proposal has a ten year minimum that'll be easy to get if you don't have it already.

You can probably pay voluntary contributions now if you like, see Voluntary National Insurance contributions if you live abroad. You should also contact a caseworker using the link on that page to see about buying up to six past years.

You could transfer from Reassure to other UK pension providers but it'll be hard to find one who will want a non-resident as a customer, even more so for a US resident. What is the approximate value of the pension pot at the moment, to the nearest £10,000 or so? That'll help us to know whether there might be any sensible transfer options for you. One thing you will almost certainly not be able to do is transfer it to a US pension, due to some substantial incompatibility between UK and US pension rules.

You cannot use the Reassure money to buy more entitlement to the UK additional or Basic state pensions, nor the new one. However, in general you should be happy. Those who contracted out will be winners in the proposed new 35 year/£144 system, as will those with relatively few working years in the UK.

I suggest that you try to arrange to have 35 years before you reach the UK state pension age. That age depends on when you were born and your gender.

Twiglet170

Thanks jamesd for your response, very informative. I bought my stack of papers to the office today and of course left the most important ones. I think the total amount in that Reassure scheme right now is around 12,700 pounds. I am going to get their recent statement and confirm it. I started work in 1974 and left the UK if 1995 so in effect had 21 years. When the guy from Barclays originally talked to our office he said that we would be better off opting out. I may be reading my last statement wrong but it looked like I would only get around 500 pounds a year from Reassure which is not definitely not more than I would have received under the old system. I will let you know the correct figures once I get the papers together. Thanks for your help.

jamesd

With just £12,700 pounds in the Reassure scheme it is unlikely to be cost-effective to transfer it. You might try emailing Hargreaves Lansdown to see if they would take a transfer, they often seem most accommodating, but I expect you to have a really hard time getting that sort of amount transferred - the amount is too low for the hassles that US law imposes on UK financial services providers.

About £500 would be with no growth between now and taking an income from the money. There's a good chance that you are wrong about that being less than the money would have got you if it was paid into the UK state system. I don't know the accrual rates for each year worked back then, though. To check we'd need to know the exact years contracted out and gross income each year, then maybe someone familiar with accrual rates back then could work it out. The UK does have a Future Pensions helpline that can tell you that gross income for every year you worked for your whole life, if you call them and ask, do take notes so they only need to do it once.

With 21 years in the UK system you should be contacting a case worker to sort out buying additional years and possibly some back years to get you to 35 total years. Doing that is a bargain compared to all other pension options available in the UK or US. There's one caveat, I'm not sure how the US system interacts, I think you can get payments independently from both but it's possible that this is not so, if that's the case then you couldn't usefully buy more years in the UK system. The case worker can tell you about this, I'm sure.