Serps opt out.....

Sibley

Could do with a heads up here.

Been abroad working for a few years.
Got back and found I have a couple of frozen pensions.

1. I can certainly remember.

2. I think I must have opted out of Serps in the 80's.

Do remember coming back into the government one later on.

However, now I have a pot with some Scottish company.
It's obviously my Serps money. Just shocked me how much it is. £35 grand.

Can I now transfer both of these into my new company scheme?
Also, what are the implications now I am short in my government one?

Thanks in advance.

molerat

You need a state pension forecast to see where you sit. https://www.gov.uk/check-state-pension.

Once you have that figure and your COPE amount you can look into your options on how to make up to the magic £155.65 if necessary - employment / benefits, pre 2016 class 3s or post 2016 class 3s .

As to 1 & 2, I am sure someone else will be along shortly to answer those.

jamesd

At the time you were contracted out of SERPS the UK state pension system had two parts:

1. Basic state pension. Based only on the number of years you were paying in or getting credits, rules changed during the last Labour government to require 30 years to get the full basic state pension. It was impossible to contract out of this part.
2. Earnings-related state pension. Based on earnings. This is the part you were contracted out of. The restrictions on what could be done with contracted out money were removed a few years ago and it's now just another personal pension pot.

As of 6 April 2016 the UK switched to the single tier/flat rate pension system and everyone was assigned a foundation amount that was the higher of their entitlements under the old and new rules. Though the final calculation won't be known until about November when NI for 2015/16 is added in. For years worked or credited after that the state pension will be increased by 1/35th of the flat rate amount per year, stopping once it reaches the flat rate level. If entitlement is already above that the extra is kept and increased by only CPI, not triple lock. Because you were contracted out you'll just be able to keep on increasing this for more years of work than a person who wasn't contracted out. You'll still probably both end up at the flat rate maximum level if there's enough time between now and your state pension age.

Since you were out of the UK you will also probably be able to buy up to six past years, your state pension statement will say. If you won't get to the flat rate level before state pension age buying enough past years to get there is probably a good move if your health is OK.

Older pensions might have a Minimum Income Guarantee attached. Since April 2015 it has been required by law to get professional financial advice before transferring a pension pot with such special protection if the value of the protected income exceeds £30k as it would do for your 35k pot if it has that protection. It might also have a guaranteed annuity rate, which were common on plans started prior to about the year 2000. Those can be attractive and are also covered by the protection rules.

So first thing to do is check for a GMP or GAR to see whether advice would be required.

The contracted out one is definitely defined contribution, a pot in your name, but is your other one that or a defined benefit one like final or average salary with a CETV (cash equivalent transfer value) instead of a pot value? If it is DC, also check for GAR or GMP, though GMP is less likely.

Then you also need to know whether the work pension will take transfers in. Not all will. And you need to compare charges and investments to see which is the cheapest way to hold the investments you want to use. If costs are close you might transfer just for the simplification.

xylophone

However, now I have a pot with some Scottish company.

I assume you know which.....

https://en.wikipedia.org/wiki/List_of_companies_of_Scotland:rotfl:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512799/your-state-pension-statement-explained-dwp042.pdf

Sibley

Really appreciate the comments thank you.

Tried getting my head around it all.
What I cant understand 'In lay mans terms'

So I opted out and now have this extra money which I can transfer into my company pension. Great.

I checked my status for government pension forecast and am in good shape. No problems there.

So by doing this opt out. I've now got a pot of money that I would not have had if I'd stayed in and done nothing. Seems like its all good with no down side.

Am I right in thinking everyone wishes they opted out now?
I can' see a down side TBH.

xylophone

Am I right in thinking everyone wishes they opted out now?

Contracted out...:)

Some people had no choice about contracting out if they wished to be a member of their occupational pension scheme.

For many years, others had no option about being contracted in.

The came the eighties when those who were contracted in were given the choice to contract out, with the prospect of vast investment returns on a private policy being dangled before them.

Then came lean times on the markets, investment returns were lower and the relative security of the additional pension provided through the state scheme seemed much more attractive and may have proved so for some.

The contracting out ended for those outside certain occupational schemes and finally for everybody.

And now, with NSP, for those who are able to "work off" their "rebate derived amount", the fact that they had contracted out can give them "two bites of the cherry".....

In sum, there were winners and losers....such is life!

bigadaj

Yes, but it's only become a certainty since the new pension changes have come in.

When you did it originally it was a gamble on getting better investment returns than the certain base level of SERPS or s2p.

The odds see in your favour but just look at things like pensions misselling and opting out of comoany db pensions to see nothing is certain, though it always is with hindsight.

The free money you invested through not paying NI could have performed poorly and given you less than the guaranteed state pension element.

xylophone

https://www.theguardian.com/money/2014/feb/10/poorer-state-pension-contracted-in

An article ( figures out of date) from a couple of years back.