Contracting out of SERPS - some queries

ScoobyZ

ian31070 wrote: »

hi I contracted out of serps in 1992 and have just found my pension pot after 20 years its with friends life in a personel pot and worth 31000 with a transfer out value of 42000 iam a bit of a moron with pensions was wondering if I should transfer it in to my public sector works pension or leave it were it is they've said its a with profits pension HELP

Just curious how you found this pension pot?

agarnett

ScoobyZ wrote: »

Just curious how you found this pension pot?

Didn't she say in the first post?:

M_M wrote:

I found this thread when I was searching for advice about contracting out of SERPS - I did this back in 1989, along with many other people, with Norwich Union as they were then. Over the years, I have received letters and statements annually, showing contributions being received. I haven't actually made any contributions myself. In fact, it's still in my maiden name and sent to my parents address where I was living at the time I contracted out.

I think she was referring to a previous thread called Contracting out of SERPS which prompted her to go looking.

There will have been no contributions made into it other than by HMRC, and no action is required over the years to switch it on or off for contracted in or out again employment. Of all types of policy, it is quite easy to forget and dismiss over the years.

My personal opinion is that is partly because they were almost always sold alongside an occupational DC scheme but were treated as a kind on minor add on or afterthought - employer's advisers brought the forms in and simply said "while you are joining the employer Group Personal Pension or whatever, sign here to receive contracted out rebates from HMRC" into a separate policy in your individual name. The DC schemes will only have lasted as long as the particular employment in most cases before they were converted to individual paid up policies - sometimes with horrendous clawback of sales commission, whereas without any action needing to be taken, the SERPS policies just trundled on, automatically gathering further annual HMRC rebate contributions like a snowball in years when the policyholder was in contracted out employment and just continuing to grow with whatever fund the policy was set up with in the years when the policyholder might have been in contracted-in employment. Occasional not insubstantial special extra bonuses may have been added too if remaining unchanged in original Old With Profits funds.

The sad fact is that lots of these policies were invested in With-Profits funds with the likes of AXA / Equity and Law / Sun Life / NU, but anyone who was following them too closely might well have been tempted with bribes in 2001 (AXA) and 2009 (NU/Aviva) and then found themselves not qualifying for the substantial bonuses that came much later.

Turns out that for some, it was better by far that policyholders did leave these things undisturbed, intentionally or otherwise , and that may still be the best case i.e. to leave them undisturbed a bit longer - but only after checking them carefully so you finally understand whether you have something that is going to perform unremarkably, or remarkably

Don't forget that if you are older than the OP, and especially if planning on retiring early, your individual forecast new flat rate State Pension will have been reduced directly because you've been paying into any 'Contracted Out of SERPS' policy without much of a chance of earning the additional full (non-rebated) NI contributions you will need between 2011 when HMRC stopped paying rebates into SERPS policies, and the date you retire. You will need them to stand any chance of getting back up to a full flat rate State Pension.

If you cash in / draw down on an SERPS pot like the ones discussed in the thread, then remember you are effectively cashing in / drawing down part of your future State Pension, unless you have time to patch it up again under the new flat rate regime with extra qualifying years before retiring.

hyperhypo

Good points.....my beef is with a method of assessing the past performance of the old NU WP fund....i need a procedure to unpick it!

agarnett

hyperhypo wrote: »

Good points.....my beef is with a method of assessing the past performance of the old NU WP fund....i need a procedure to unpick it!

I suggest you start on the phone and see if you can tease out some clues and at the same time ask for a transfer value including a particular note of exactly what %ages are applied to which tranches of contribution or prior bonuses to arrive at how the final bonus part of the transfer value is calculated

If you don't ask for the underlined bit, you probably won't get it.

Even when you do get it, you'll probably have more questions than answers!

sickasachip13

Hi there,

I'm hoping someone can advise me. I opted out of SERPS with Barclays around 1990. I didn't remember about this until Barclays found me about three years ago. The value of the opt-out account/fund fluctuates a lot from year to year and is currently at about £16k.

I now work in the public sector and have a much larger wage than I did way back then. I don't have any pension and am 43 y-o. I want to take out a pension with my employer, and the terms seem good (and I'll have to pay a considerable monthly sum obv!).

My questions:
a) is it worth me seeing whether I can transfer the SERPs money into my new employer pension?
b) if not above, what else could I do with the SERPs money? Is it worth setting up a payment to it as well as my employer pension?

I really know nothing about all this so apologies if these are really obvious questions!

SAAC

xylophone

You are just about to join a public sector pension? You may be able to transfer in your old plan and should check with the administrator.

You may prefer to keep the old pension separate to allow more flexibility - earlier retirement than scheme retirement age say?

You may wish to check the cost of the old pension against a modern plan - you may wish to contribute to it as well as to your PS pension in the interests of flexibility as above.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

ScoobyZ

agarnett wrote: »

Didn't she say in the first post?

Yes SHE did but I was quoting and asking Ian.

hyubh

is it worth me seeing whether I can transfer the SERPs money into my new employer pension?

Yes, notwithstanding the flexibility point xylophone raises. If you haven't been given a starter back with a transfer enquiry form in it, contact your current pension administrator asking whether a 'non-Club transfer in' is possible, and if so for the form to complete to kick off getting a quote. (It will probably be a matter of sending the completed form to your old pension provider, who will then provide relevant details to the new administrator, who will then calculate the benefits the ex-SERPS money would buy; you would then have a defined period of time to decide whether to proceed.)