Opt out of 2015 Police pension

sadcop

I have been a Police officer for 12 years and joined on the 1987 Police pension scheme where I was supposed to work for 30 years and pay 11% into the pension scheme.

Following Hutton's pension review where all public sector pensions were grouped together and general recommendations put forward irrespective of the state of any individual scheme. The schemes ranged from non contributory to 11% contributions for Police.

I currently pay 14.25% of my salary into the pension and the index linking has changed from RPI to CPI. The change in index linking alone has effectively reduced the benefits of the pension by around 20% over the life of the pension .

I accepted these changes because the pension was still good and the general pressures on the Countries finances. However, when the 2015 pension changes come in I will have to work 8 years longer, still paying in 14% to receive a lot less at the end. And if I decide to leave the Police prior to retirement age (now 60) I will have to wait until state retirement age until I claim my Police pension.

Given the state of Policing at the moment I don't know if I will serve the full 26 years until I reach 60. This will also be the second pension change in 10 years and I don't trust any future government not to change it again.

So I am looking at coming out of the Police pension scheme. I appreciate I will loose out on employer contributions but if I invest well in a SIPP I can build my own pension pot and take advantage of the compound interest and the recent changes to private pensions when I do retire.

I have several friends in the Police who have opted out in recent years and invested that money in property and they seem to be very happy with their investment choices.

Any thoughts or recommendations?

le_loup

Try a search on this forum. You will get your answer.

Southend1

Your friends may be happy now but when they reach retirement age and realise how much better off they could have been, then you will be laughing all the way to the bank because you didn't opt out of what is still a very valuable pension scheme.

jimi_man

Essentially, don't. You may well be able to build a pension pot with a SIPP but I don't know why you wouldn't take advantage of the employer pensions scheme, where they manage the risk, match the 13-14% contributions and pay an index linked pension with suitable spousal benefits? It seems like cutting off your nose to spite your face.

i imagine there are many people on here who'd love to have the opportunity of such a pension.

I don't get why the change of RPI to CPI is such a deciding factor? Unless I'm mistaken, with a SIPP you are unlikely to get either?

Also you are not strictly correct to say that if you leave before 60 then you don't get your pension until SPA (67-68). If you leave at 55 then you can take it immediately (albeit with an actuarial reduction) or leave at 55 and wait until 60 to get it. In a country where the majority of people are expecting to work until 67+ and my kids, probably until 70, I don't call working till 55 (or even 60) a particular hardship.

I'm not a pensions expert by any means, so others may come along and trump what I've said.

If you want to retire still at your original age (52 from your maths) then I guess you'll have to save enough money to enable you to bridge the gap until your pension pays out.

hugheskevi

First, forget the past. What pension you had is irrelevant, the question is what is best of the choices you have available going forward.

From what you say, the choice is between:

(a) Opt-out, get nothing, pay nothing.

(b) Remain in scheme as active member until retirement

Pay 13.44% contributions in the post 2015 scheme (I think). Accrue pension of 1/55.3 with revaluation of CPI+1.25%, and a Normal Pension age of 60.

(c) Leave before retirement

Pay 13.44% contributions in the post 2015 scheme (I think). Accrue pension of 1/55.3 with revaluation of CPI+1.25% until leaving then CPI thereafter, and a Normal Pension age of 68 (based on your age).

If you are staying in the scheme until retirement (ie scenario b) then remaining in the scheme is almost certainly better than opting-out.

If you leave fairly soon after joining the scheme, the cost of those benefits is very expensive and there is very little value in the employer contribution (ie you are pretty much paying for all of the pension benefits yourself). That reflects the strong cross-subsidies between early leavers and long-stayers in the scheme.

You are probably old enough to make staying in the scheme worthwhile (if you were a young new entrant the figures would be even less favourable), particularly as you get final salary linking on the old benefits. You don't sound as if you have any intentions to leave imminently, which further makes remaining in the scheme attractive.

hyubh

Following Hutton's pension review where all public sector pensions were grouped together and general recommendations put forward irrespective of the state of any individual scheme.

Lucky you - the 1987 police scheme is supremely expensive for the taxpayer, so you would have got off worse otherwise.

The schemes ranged from non contributory to 11% contributions for Police.

The 2006 police scheme has lower employee rates than the 1987 scheme; despite this, it is a lot less expensive (that's why it was brought in). As such, looking at employee rates only gets you so far.

So I am looking at coming out of the Police pension scheme. I appreciate I will loose out on employer contributions but if I invest well in a SIPP I can build my own pension pot and take advantage of the compound interest and the recent changes to private pensions when I do retire.

Insanity! The notional employer rate is 24.2%, and that's in the la-la land of accounting for an unfunded public sector scheme. Do you know what happens if the total contributions (employee and employer) for a year comes to less than the pension benefits paid during it, which happens not infrequently with the PPS...?

PeacefulWaters

There's old scheme = really good.

There's current scheme = pretty good.

There's opting out = less value and smaller pension for you.

If one option of the three isn't available then it comes down to a straight choice. Which do you think is best?

dunstonh

but if I invest well in a SIPP I can build my own pension pot and take advantage of the compound interest and the recent changes to private pensions when I do retire.

But will never come close to getting what the Police pension would pay you. You would also be classed as an opt out a number of providers will not accept business from opt outs.

I have several friends in the Police who have opted out in recent years and invested that money in property and they seem to be very happy with their investment choices.

Other peoples stupidity does not mean you have to follow.

No alternative will beat the Police pension scheme. You would have to pay in over 30% of your income to come even close. You are better off keeping the Police pension scheme and using surplus income to put money aside.

atush

It would be very foolish to leave.

kidmugsy

It's not very comforting to think we're policed by someone acting so irrationally just because he's having a hissy fit.

Anyone who frequents this forum is used to that behaviour from teachers and NHS employees but, really, bobbies?

atush

Yeah we've had a few in the past.