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

jem16

C_Mababejive wrote: »

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.

You really had no choice but to contract out if it was a Final Salary pension. By joining the pension scheme it was automatic.

As to the details of the scheme, every employer provides the scheme booklet. Did you read it?

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??

Well I would have as if I hadn't I wouldn't have got my final salary pension from the Teachers' Scheme which is far greater than I would be getting if I hadn't joined and was getting SERPS/S2P.

Any sensible person would have found out what it meant rather than simply not signing to join a Final Salary pension scheme.

dunstonh

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.

That means you had no choice but to be contracted out with the scheme Where there is no choice, you can't be mis-sold. Plus, these are not retail products.

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.

You would have been given a scheme booklet. That contained all the key points as well as explanations in some of the more complicated areas and the contact details of the scheme administrators if you had any questions. You could also have employed an IFA if you wanted more info.

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 they paid less NI and had the excellent final salary scheme which outweighs it.

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??

They would be silly if they didn't as the final salary scheme would trump the difference in lost additional state pension.

You are not alone in how you feel. The comments sections of media articles have many similar comments. However, its a very similar scenario to when you took it out. Not understanding the stuff at the start and now people not understanding it at the end.

Just noting that the OP is referring to the other type of contracting out (using a personal scheme and not contracting out with a defined benefit scheme).

magpiecottage

agarnett wrote: »

Cannot let you get away with poopooing the contracting out missale suggestion quite so easily dunstonh

I have recently commented extensively on this thread.

In order to do do so, I have researched this issue in some detail.

Dunstonh is not quite correct. The latest figures issued by FOS indicate that the uphold rate involving SERPS is 3%, not 2%.

However those complaints involve not merely contracting out but the administration of pension plans and other issues.

I looked into the records of complaints upheld by an ombudsman where SERPS was at least part of the basis of the complaint. from 1 April 2013 to last month. Just fifteen were recorded and not one of those was upheld because a recommendation to contract out in the first place was found to be flawed.

agarnett wrote: »

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

The phrase "I think" suggests you do not know but are, in fact, guessing.

The guess is wrong. If you were in a defined benefit scheme that was already contracted out then your employer would have withheld the part of your NI contributions that would otherwise have bought SERPS and put it into the pension scheme rather than paying it to the Department of Social Security (as was).

agarnett wrote: »

Actually mine didn't receive some of those contributions until a few years later due to some kind of backlog or oversight at HMRC.

This seems inconsistent. However, if you subsequently left the scheme or it ceased to be contracted out, that could happen.

There was a problem at the DSS (not HMRC - it had been resolved by the time HMRC took over responsibility) but it was not the fault of the insurance company that a government office was incompetent.

agarnett wrote: »

Goodness knows what I lost in investment terms because the government rebated NI contributions arrived in my policy years late.

The government paid interest on the delayed payments.

With regard to the other conspiracy theories, employers paid far more into contracted out schemes than the NI they saved and, in effect had to write a blank cheque.

Many closed because changes in legislation added guarantees which made them unaffordable to employers. Neither advisers nor insurers are responsible for those changes.

Typically, when defined benefit schemes closed, either employers retained them as closed schemes, running them down over time as members and their spouses died sold them as a closed book to an insurance company, which would then take responsibility for paying the contracted benefits or sold them on as individual contracts which promised to pay the contractually defined benefits - so called Section 32 policies (this refers to section 32 of the Act of Parliament when introduced them).

How the guaranteed minimum pension (paid in lieu of SERPS) is calculated - and how it affects any retained SERPS involves extremely complex calculations which are dependent on parameters defined by the Government. These take account of both increases in prices and national average earnings.

They are very difficult to understand but that is not the fault of either the insurance company or the adviser.

C_Mababejive

jem16 wrote: »

You really had no choice but to contract out if it was a Final Salary pension. By joining the pension scheme it was automatic.

As to the details of the scheme, every employer provides the scheme booklet. Did you read it?



Well I would have as if I hadn't I wouldn't have got my final salary pension from the Teachers' Scheme which is far greater than I would be getting if I hadn't joined and was getting SERPS/S2P.

Any sensible person would have found out what it meant rather than simply not signing to join a Final Salary pension scheme.

Yes i hear you and i agree but not everyone has had the good fortune to be in job for life type scenarios where you can build up 30 /40 years in a solid FS scheme..come to think of it i do vaguely think i remember that it was condition to opt out of serps in order to join a FS scheme in those days..but i wonder why that was and by what legislation?

My comments are really meant for others who may have had haphazard, shorter term employment and contracted out but didnt have the opportunity to build up decades of contributions.

In such cases, if someone had joined an employer,signed an opt out,,worked for them for a few years then joined a new employer who didnt offer a PS,,would they be automatically opted in? i guess so as the employer would be obliged to deduct/pay NI unless they were a..err..fringe employer.

jem16

C_Mababejive wrote: »

Yes i hear you and i agree but not everyone has had the good fortune to be in job for life type scenarios where you can build up 30 /40 years in a solid FS scheme.

No but you still got the benefit for the time you were in the scheme whether it was one year or 40 years.

come to think of it i do vaguely think i remember that it was condition to opt out of serps in order to join a FS scheme in those days..but i wonder why that was and by what legislation?

For the saving in employer's NI, the employer had to give a pension that was worth at least, if not greater, than what was being given up.

In such cases, if someone had joined an employer,signed an opt out,,worked for them for a few years then joined a new employer who didnt offer a PS,,would they be automatically opted in?

That's what would happen, yes.

i guess so as the employer would be obliged to deduct/pay NI

Correct.

dunstonh

My comments are really meant for others who may have had haphazard, shorter term employment and contracted out but didnt have the opportunity to build up decades of contributions.

Contracting out is a yearly thing. So, people could have x number of years contracted out and x numbers of years contracted in. With the number of qualifying years longer than the average working life, you could easily find people that get the full amount of new state pension and some contracted out benefits.

Snakey

That's me, I hope. Been contracted out for twelve years, current age 43 and unbroken contribution history so I think I can spend the next 25 years making up for it? I'm not entirely sure how it works and I don't think it's as simple as just getting to 35 contracted-in years in total, but there's plenty of time for me to work it out - I'm sure all the newspapers will republish their idiot's guides once again round about next April but hopefully without the "I'm just a journalist and didn't dig any further than the press release" vagueness.

I was always told to assume that the State pension would no longer exist by the time I retired so I should plan without it and consider it as a bonus if I got any, so I'm fairly sanguine about it either way.

Sterlingtimes

dunstonh wrote: »

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

At 60 years old at today's value my projection resulting from equal time period contracted in and out is £237. That seems pretty reasonable.

Thrugelmir

dunstonh wrote: »

Contracting out is a yearly thing. So, people could have x number of years contracted out and x numbers of years contracted in. With the number of qualifying years longer than the average working life, you could easily find people that get the full amount of new state pension and some contracted out benefits.

I can count myself amongst those.

gadgetmind

Thrugelmir wrote: »

I can count myself amongst those.

An myself, and my wife. Our protected rights were £44k+£14k in early 2011 when it all got rolled in with everything else, so probably a six figure sum now. With 25% PCLS, flexibility on when to access it, and a much better return than we'd have got from S2P, what's not to like?

However I'm sure some people managed to make a mess of it. Some people always do.