"Opt of of Serps" - Is it still active?

ClarkeKent

About 15 years ago in starting my pension I was advised and decided to "Opt of of Serps". This I believe, meant and led to the govt paying into my private pension plan and me forgoing my right to a govt pension later.

Having not paid into my pension for 10 years now I am unaware of whether this is still active and can't recall opting back in.

Are we all automatically opted back into the govt pension scheme if paying NI? I am sure I read in the news that the govt was scrapping serps in the last couple of years (to keep hold of the cash I assume rather than pay to 3rd parties immediately)

jem16

ClarkeKent wrote: »

Having not paid into my pension for 10 years now I am unaware of whether this is still active and can't recall opting back in.

Contracting out ( not opting out as that is for choosing not to pay into an occupational pension ) ended a few years ago for all but Defined Benefit pensions which will end next April.

Perhaps check the pension scheme where your contracted out deductions went and see what happened?

dunstonh

About 15 years ago in starting my pension I was advised and decided to "Opt of of Serps". This I believe, meant and led to the govt paying into my private pension plan and me forgoing my right to a govt pension later.

The term was contracting out of SERPS. It meant forgoing your rights of qualification for an additional state pension for that year (and each year you contracted out). Instead, an NI rebate was paid to your personal pension provider. It had no impact on the basic state pension.

Having not paid into my pension for 10 years now I am unaware of whether this is still active and can't recall opting back in.

If you did not contract back in or your provider did not contract you back in (many did in the early 2000s) then you would have been contracted back in automatically in 2012 when contracting out was abolished.

I am sure I read in the news that the govt was scrapping serps in the last couple of years

SERPS was abolished in 2002. It was replaced with the second state pension which will abolished with the new single state pension.

to keep hold of the cash I assume rather than pay to 3rd parties immediately)

To simplify the system and abolish many retirement benefits.

Snakey

I was merrily contracted-out for twelve years without realising. Turns out the form I signed was actually a continuous authority. I had a lot going on in my life over the following year (separation, divorce, new town, new job, another new job, selling the house), and when the dust settled it didn't occur to me to wonder whether the pension that I was now no longer paying into was anything other than inactive. The internet wasn't what it is now, so a two-minute forum post on a just-in-case basis wasn't an option either!

You can't tell from your payslip or P60's because it's only DB pensions that charge you a reduced rate up front. DC ones reclaim it quietly behind the scenes. I only found out when I decided to get all my pension money into one place, and did one of those official searches for old funds. I was expecting to have a grand in there at most and was briefly delighted at the fact that I'd apparently turned about £400 of contributions into £22k...

They did indeed scrap it a couple of years ago and so you'll be back in now, but you need to confirm the historical position if you want to get a proper idea of how your State pension will be affected under the new rules.

For me I think I'm a winner overall, because I'll have enough time to get extra years in to get the full State pension regardless. Not a total winner, unfortunately, because leaving contributions unattended for 12 years turned out not to have been the best investment strategy (no idea whether the lack of growth was due to charges or what), but it's better than a poke in the eye.

C_Mababejive

I realise the received wisdom is that if you contracted out then somehow you did better but i do wonder if contracting out could be the new PPI. I mean ,thousands of people were just advised to opt out by employers whos real aim was to save on their NI payments. I think a lot of people opted out and didnt really know why or what the effects would be.

dunstonh

but i do wonder if contracting out could be the new PPI.

On what basis?

The FSA did a review a number of years ago and found a potential failure rate of just 1.5%. The FOS have yet to have an ombudsman decision that has upheld a complaint on contracting out and the overall FOS complaint stats are the lowest of any product type at just 2% upheld.

The SIB did a review back in 1996 and found everyone who had contracted out prior to then was better off.

I mean ,thousands of people were just advised to opt out by employers whos real aim was to save on their NI payments.

No NI saving from the employer for contracting out with a personal pension. If it was contracting out with an occupational pension then you had no choice. So, no mis-sale possible. Employers do not give advice. They carry no advice liability.

agarnett

Cannot let you get away with poopooing the contracting out missale suggestion quite so easily dunstonh. I have too much experience of the various upshots of it to let you do that.

As I am sure you well know, your industry has bounced along for decades according to the most recent government lobbied industry opportunity.

By 1989 the industry was highly active in selling contracted out apparently "occupational" employer schemes to SME's which took the form (typically) of executive ("portable") pension plans which actually were no such thing, alongside government backdated subsidised separate personal pension plans commenced for no other reason than to be the repositories of NI rebated SERPs contributions. I think I have a SERPs policy that received backdated contributions back to a period when actually I was in a contracted out DB scheme, such was the frenzy of the industry in rushing to exploit the results of an effective lobby to government. Actually mine didn't receive some of those contributions until a few years later due to some kind of backlog or oversight at HMRC. Goodness knows what I lost in investment terms because the government rebated NI contributions arrived in my policy years late.

Over the decades of my working life, the messes I have witnessed left in the wakes of hoards of commission-paid here today and gone tomorrow life and pensions insurance sales people are absolutely breath-taking. The assumed cloak of respectability and zipped lips of those that survive in the industry as old stagers and now urge that of course their work is paid by agreed professional fee are equally breathtaking at times.

For a start, many of those original contracted out SERPs policies were invested in With-Profits funds which were at the time still very much seen as the conservative, steady and safe investment for the common man. Look what happened to those (huge broken promises and totally abdicated policyholder expectations). Missale #1.

Then you do indeed have the earlier DB schemes which were contracted out largely for the employers' benefit in achieving discounted NI contributions, and when the employers eventually got tired of keeping their pension promises so the same trusted consultants who signed us all up to our employers' contracted DB schemes during the 70s and 80s came along in the 90s and 00s and wound up those schemes on behalf of the employer trustees (yes by that time almost all the "trustees" could not be trusted as far as you could swing a cat or spit, because they were ambitious FDs and HR directors and CoSecs and the like and whose future careers rested upon continually currying favour with their employer).

So those schemes got sold down the river/eventually wound up and replaced by cheap money purchase schemes with hardly a mention of what was contracted out and what not - who cared? - so the replacement schemes were anybody's guess as to whether they should have been contracted in or out. The wound up DB schemes got converted by default into Section 32 buy out policies which theoretically contained contracted out GMP provision but after 1997, the GMP provision arising out of the original DB scheme having been contracted out seems to have been watered down by legislation. Fast forward the best part of 20 years when the likes of yours truly are trying to make sense out of their pension entitlements and we find that the likes of Aviva who sold a lot of the Section 32 buy out policies cannot even begin to explain exactly what they "bought out" particularly i.r.o. contracted out GMP provisions within the thousands of schemes their products replaced. Missale #2

The result is a shameful mess especially when you take into account that the With-Profit funds that many of the original SERPs pension contibutions and Section 32 buy out policies were invested in have been deliberately undermined and pillaged for pension provider company shareholders' benefit. Reattribution they called it. Daylight robbery I call it. Missale #3

And as for FSA (now FCA) and FOS and SIB, who the hell thinks anything they say is gospel? They are staffed by a continuous stream of industry insiders, clowns and suckers-up.

dunstonh

I have too much experience of the various upshots of it to let you do that.

Yet your response is total nonsense and indicates no knowledge of the subject and, as usual, your comments are about something totally different.

GibbsRule_No3

I am the first to admit that when I joined the Civil Service 45 years ago at age 17 I was lucky enough to be automatically enrolled in a final salary pension. I did not have any choice that was just what happened and in a few years time, well five now, since the women's retirement age has changed since I started work, when it was still 60, I will have a nice pension. I always knew and was told that my pay for the job was less than I could get doing the same thing outside the CS because of the Pension that I would get, so did I not pay in for it in a roundabout way but now will not get the full SP that people who were not contracted out will get? Also is the SMART pension option that I am in now going to make another affect on the final SP that I will receive? Granted SMART was an option that I did elect to take, also admitting (blames self). I had/have no idea what benefit or not these SMART thing is having on my SP. I'm sure I'm not the only one. Probably headlines in papers saying SP for "everyone" after April 2016 would be £££ and not looking at the small print where it said "except for those who had opted out" is also my fault.

jem16

GibbsRule_No3 wrote: »

I always knew and was told that my pay for the job was less than I could get doing the same thing outside the CS because of the Pension that I would get, so did I not pay in for it in a roundabout way but now will not get the full SP that people who were not contracted out will get?

There are two parts to your CS pension. One is the part paid for through being a Civil Servant and the other is the GMP that is paid for through your contracted out deduction where you pay less NI every month.

Also is the SMART pension option that I am in now going to make another affect on the final SP that I will receive?

No it's going to make no difference whatsoever as you will still have the qualifying years to qualify for the basic state pension.

Granted SMART was an option that I did elect to take, also admitting (blames self). I had/have no idea what benefit or not these SMART thing is having on my SP. I'm sure I'm not the only one.

People really should find out the benefits of what they sign up for. By using SMART - ie another name for Salary Sacrifice - you are saving yourself 12% ( possibly more depending on how much you earn ) NI every month. Is that not a good thing?

Probably headlines in papers saying SP for "everyone" after April 2016 would be £££ and not looking at the small print where it said "except for those who had opted out" is also my fault.

The headlines were wrong to portray it the way they did.

However not looking further into it is your own fault as all the information is there and easily found. Why would you blame someone else?

C_Mababejive

dunstonh wrote: »

On what basis?

The FSA did a review a number of years ago and found a potential failure rate of just 1.5%. The FOS have yet to have an ombudsman decision that has upheld a complaint on contracting out and the overall FOS complaint stats are the lowest of any product type at just 2% upheld.

The SIB did a review back in 1996 and found everyone who had contracted out prior to then was better off.



No NI saving from the employer for contracting out with a personal pension. If it was contracting out with an occupational pension then you had no choice. So, no mis-sale possible. Employers do not give advice. They carry no advice liability.

You know far more than I about such matters and my personal position is that I have a FS PS which i have been paying into for a long time so without actually seeing data i can feel fairly confident that im doing fine.

But still i know that many years ago when i signed up for the PS, i was young and dont recall anyone telling me the finer detail about what it was all really about.

I also have acquaintances who have gone through several jobs/employers who have recently been awakened to the whole SSP thing when they realised they arent going to get the full SSP and then find out they contracted out years ago but dont remember it, didnt know the implications and one recalls being told that if they signed this form they would pay less NI..which sounds good when you are young,,more in your pay packet... BUt if someone had said, if you sign this form ,when you retire you will get less state pension,,would they still have signed it??