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

gadgetmind

Snakey wrote: »

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?

Come April 2016 you'll get a foundation amount. It's unlikely you'll be at full amount under old system, and I think it's unlikely you would be even if you hadn't contracted out. However, additional years will get you up to full flat, and you'll have your contracted out pot too.

I think you're one of the many winners.

crystal_pixie_2

Ok so let me get this right.

I am fortunate to be in a good DB scheme which I am contracted out.

So from next year not only will I have to pay more NI but potentially I could have a smaller state pension that someone who earns far less and has probably contributed less over the years?

Hmmmm.... trying to see the fairness in that.

I go on the assumption that there will be no state pension in 25 years time.

dunstonh

So from next year not only will I have to pay more NI but potentially I could have a smaller state pension that someone who earns far less and has probably contributed less over the years?

No. You will get the same, possibly more than you were always going to get. You will get at least the basic state pension plus an amount for years that you were not contracted out.

The increase in NI that you will pay will build entitlement for an extra amount. The increase brings you in line with those that were contracted in and you will get the same benefit going forward.

There will also be those that have "contributed" more than you who will get the same or less than you. Such is the tax system.

C_Mababejive

dunstonh wrote: »

No. You will get the same, possibly more than you were always going to get. You will get at least the basic state pension plus an amount for years that you were not contracted out.

The increase in NI that you will pay will build entitlement for an extra amount. The increase brings you in line with those that were contracted in and you will get the same benefit going forward.

There will also be those that have "contributed" more than you who will get the same or less than you. Such is the tax system.

Yes thats how i understood it and it sounds fair enough. My employer is increasing deductions next year to take account of being contracted in again and as you say, that extra bit will buy further state pension for the remaining years that i work.

I think for many people ,including myself, there is much benefit in building up funds in tax efficient schemes and planning to pay less tax on retirement.

agarnett

magpiecottage wrote: »

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.

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).


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.

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.

As you may have guessed. I have been away from the forum since I originally posted. The thread hasn't really developed much further, much like the whole subject hasn't developed any further after a whole year or more, so here I am again.

I honestly don't know why you magpiecottage and you dunstonh continue to claim professional status if you can't resist demoting much of what I write because it is contrary to your own "insider" blinkered and actually probably limited view even though you both like to come across as having seen it all by now.

Whilst you may do each other a service, and do other industry insiders a service in the face of unwanted consumer complaints, there has to be a question as to whether you can be relied upon to properly field and advise (yep) on consumer forum queries about how the industry has actually behaved in particular cases or even the general case, You also offer your judgement, and some of those are a direct reason why actual complaint numbers on this extremely complex area of personal finance are so low. You pronounce a judgement here that says no missale occurred in a general case and instantly you wipe 100 complaints off the future complaint statistics for the next 6 months, such is the power of MSE.

You are in large measure the enemy if you cannot bring yourselves to understand with an properly open mind the big picture of the consequences of your industry's self-serving twists and turns over three or four decades.

Neither of you acknowledged that PPI reclaiming was generally proper until the head honchos in the industry were embarrassed by Martin Lewis (without your help) and COMPLETELY caved-in. I thought (and wrote) long before then, and I think now, that you backed the wrong horse. You can call it "guessing". Informed guessing actually coupled with well founded opinion.

I think you are probably both old enough to realise the state the whole industry is in is not because of governments, but because of incessant and flawed lobbying of governments by the industry, but unfortunately you are both still part of it so don't like to admit anything until someone higher up the tree has admitted it first, and even then not too loudly so as to bite the industry that feeds you! Don't worry, it's the human condition we all suffer from. A lot of us just don't like to admit it freely and go through life never doing so, blind to our own faults in so many ways. I am not immune, but nor are you!

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).

You accuse me of guessing and not knowing, magpiecottage when I assert that I think I received a retrospective contribution to my SERPs policy for the a period overlapping with my membership of a contracted out Final Salary scheme. The way you have chosen to analyse seems like a deliberate put down. Did you mean it that way or was it a request for more information? You are a technical and forensic expert in a narrow field within the industry and everything you write has to be tempered to maintain your reputation as a wise judge with other insiders, does it not?

What makes you think I am less of an expert in industry technical and broad compliance issues generally? Because I am not employed as a wise judge so am not as careful as you in what I write? I have the luxury of not being beholden to an industry I have grown to despise after once being proud to serve within it. I do not dispute that you have done some very good forensic investigations in your time and shone a spotlight on a few bad apples, but I don't think you habitually take on the big guys quite so easily, nor are prepared to acknowledge a general malaise and indifference to consumer real life-changing complaints amongst the current workforce, or am I guessing wrong again?

But back to the crazy situation back in the late 80s and early 90s with government handling of SERPs contributions - I would not have said what I did if I hadn't got fairly good grounds for wondering about it (a fairly complete insurance company file and a complete file of my own supplemented with DHSS/HMRC/DWP data)! I don't just make this stuff up - I am not that creative and I don't need the excitement of arguing that something is true when it is obviously a bit incredible to start with! The fact that I have observed something in my own personal files which seems incredible, is the sole reason I have written about it, because incredible behaviour should not be brushed under the carpet if it signifies incompetence and industry recklessness on a broader scale (which it seems to do).

For all I know, such an overlap might have been permissible, but I don't, and judging from your grabbed wrong end of the stick response, perhaps neither do you, but you wish to ridicule it anyway.

Go ahead. Your industry suffers government as much as the general public doesn't it? We should feel sorry for each other, shouldn't we?

Big bad governments - one after the other - didn't have a clue what they were doing, did they? Not surprising when the industry experts were lining their own nests and sharing and lobbying only the sorts of stuff which satisfied their shareholders (I guess).

magpiecottage

Just come across this.

agarnett wrote: »

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.

Okay, lets have a look

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

Actually, executive plans were sold, as the name suggests, to directors and certain senior managers. They were for people within SMEs who were committed to staying long term.

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

You think wrongly. If you were in a contracted out defined benefit scheme then part of your National Insurance benefits - and those of your employer - were redirected into the scheme. In return, it was required to ensure it provided a Guaranteed Minimum Pension (GMP).

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.

Interest was paid on those contributions - and it was hardly the fault of the insurance companies.

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.

I think you will find that it is a legal requirement that investment advice is paid by fee rather than commission.

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

As I have noted, the employer had to pay the saved NI into the scheme anyway. They did not benefit from it. In fact, they had to pay considerably more into the scheme than the saved NI.

and when the employers eventually got tired of keeping their pension promises

Generally because the government forced them to provide ever more generous (and thus expensive) promises if they continued to run the schemes - something that could not have reasonably been foreseen. Eventually most employers could no longer afford them.

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).

Clearly, you do not understand the role of a trustee. They are expected to act in the best interest of the beneficiaries but they cannot spend money that the trust does not have.

If the employer is unwilling or (as was more common, for the reasons I have given) unable to continue funding the scheme, there is little that a trustee can do about it.

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

Generally speaking, buyout policies were sold en masse when defined benefit schemes closed so that the benefits the scheme had offered would be guaranteed by an insurance company. This saved the employer the ongoing commitment of running it down over many decades. It may or may not have been a missale but it was the employer that paid, not the employee.

Unfortunately, GMP calculations are very complex. That is the fault of the government, not the insurance company - or the employer. There are people who can calculate them. Aviva, and other insurers normally use actuaries to do it and they maintain software to calculate it.

On the rare occasion I have calculated it from scratch, it has taken me days to do it.

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

A large number of life offices are mutuals. They do not have shareholders and are instead owned by their policyholders.

Of the others, many were mutuals but the members voted to become a plc because they saw it as a way to make a quick buck. This includes, Standard Life, Friends Provident (now Friends Life) and Norwich Union (now Aviva). In those cases, any fault is down to policyholders.

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.

I think many advisers would have some sympathy with two of those views.

However, "industry insiders" however, lets look at your comments on "industry insuders" - Particularly ar FOS. The majority of its ombudsmen have never worked in financial services other than for a regulator or FOS or one of its predecessors.


To his credit, Sir Anthony Holland, on becoming appointed the PIA Ombudsman in the 1990s, passed the qualification the PIA demanded all advisers held - despite being a highly qualified and experienced lawyer. I decided years ago that was a good example to follow.

It is not, though, one that FOS demands.


Whilst I appreciate you have a grievance, your arguments are unfounded and therefore appear irrational.

gadgetmind

magpiecottage wrote: »

Of the others, many were mutuals but the members voted to become a plc because they saw it as a way to make a quick buck.

Ah yes, happy days.

To his credit, Sir Anthony Holland, on becoming appointed the PIA Ombudsman in the 1990s, passed the qualification the PIA demanded all advisers held - despite being a highly qualified and experienced lawyer. I decided years ago that was a good example to follow.

Agreed 100%. You don't need to be able to do the job of those you manage, but you do need to understand what they do, and you do need technical credibility.

agarnett

magpiecottage wrote: »

Actually, executive plans were sold, as the name suggests, to directors and certain senior managers. They were for people within SMEs who were committed to staying long term.

Oh right and "long term" in your book nicely coincides with the time it takes the financial adviser to have weaned themselves off the tittie and moved on to the next suckers?

You think wrongly. If you were in a contracted out defined benefit scheme then part of your National Insurance benefits - and those of your employer - were redirected into the scheme. In return, it was required to ensure it provided a Guaranteed Minimum Pension (GMP).

Oh, and does it?

Interest was paid on those contributions - and it was hardly the fault of the insurance companies.

That they set up the policies and then forgot to service them or to apply to Newcastle for the funds that were supposed to fuel the policies they sold, you mean? Did the FAs get interest on their commissions too?

I think you will find that it is a legal requirement that investment advice is paid by fee rather than commission.

I know you will find that it took bloody decades for that obvious legal requirement to get passed and relatively recently so it didn't apply to my policies.

Clearly, you do not understand the role of a trustee. They are expected to act in the best interest of the beneficiaries but they cannot spend money that the trust does not have.

Oh I think I do clearly understand it better than you do, possibly because I worked for three of them responsible for the worst wind up. They didn't like me suggesting what they were doing was wrong. Funny that, eh?

If the employer is unwilling or (as was more common, for the reasons I have given) unable to continue funding the scheme, there is little that a trustee can do about it.

Nothing common about our scheme. The employer could afford every penny and the trustees did the employers dirty work instead of resigning as they should have done.

Generally speaking, buyout policies were sold en masse when defined benefit schemes closed so that the benefits the scheme had offered would be guaranteed by an insurance company. This saved the employer the ongoing commitment of running it down over many decades. It may or may not have been a missale but it was the employer that paid, not the employee.

Pardon? What kind of hair are you trying to split?

Unfortunately, GMP calculations are very complex. That is the fault of the government, not the insurance company - or the employer. There are people who can calculate them. Aviva, and other insurers normally use actuaries to do it and they maintain software to calculate it.

On the rare occasion I have calculated it from scratch, it has taken me days to do it.

Well maybe your maths ain't up to it - we can't all be experts in everything now can we? Although some make themselves out to be. There's absolutely nothing complex about the reality of how much pension contribution went where and why. It's in my payslips an P60s and I only have 40 of those. Might I suggest a course in Microsoft Excel and Visual Basic, followed by another in arm-twisting to establish who did what to which, why and when?

A large number of life offices are mutuals. They do not have shareholders and are instead owned by their policyholders.

Of the others, many were mutuals but the members voted to become a plc because they saw it as a way to make a quick buck. This includes, Standard Life, Friends Provident (now Friends Life) and Norwich Union (now Aviva). In those cases, any fault is down to policyholders.

Dumb sheep you mean ... scattered in what ever direction the rogue sheep dog fancies? Give me a break. I thought you were wanted to be known as unbiased.

However, "industry insiders" however, lets look at your comments on "industry insuders" - Particularly ar FOS. The majority of its ombudsmen have never worked in financial services other than for a regulator or FOS or one of its predecessors.

Oh really ? Do the ombudsmen set the rules by which they judge cases or is it others who come through as insiders and streamline the ombudsman decision making process in order to streamline operational throughput ? It's a highly political task of course.

To his credit, Sir Anthony Holland, on becoming appointed the PIA Ombudsman in the 1990s, passed the qualification the PIA demanded all advisers held - despite being a highly qualified and experienced lawyer. I decided years ago that was a good example to follow.

Not very challenging though, was it? I mean when the dear old chap did it, he was no older than me, and no doubt in full working order, and it wasn't exactly a degree level qualification, now was it? How quickly did he pass it? Was it multiple choice?

Whilst I appreciate you have a grievance, your arguments are unfounded and therefore appear irrational.

I'll be the best judge of that, madam. I urge that you sometimes seem a little too wed to the industry to be seeing perfectly straight in all respects

gadgetmind

What an idiot.

magpiecottage

gadgetmind wrote: »

What an idiot.

I think you flatter her.

It seems that, having lost the argument, she has resorted to foul language.

Most unbecoming.