Serps opt out.

Orville

Hi.

Just had an ad appear on my facebook wall (yeah i know) but it was asking if you had opted out and saying you can be entitled to compensation. They wanted to know what company etc. I never signed up as I would rather do it myself like I did with the banks.

Does anyone know anything about this and how I can go about putting in a claim if I am entitled...

thanks..

Nasqueron

If you were advised to contract out (as opposed to opt out) and feel this was wrong you can complain to the provider of that advice and ultimately the FOS - however ee a decision here from 2008 though where being under a certain age when doing so was actually considered good which they are still referring to in recent publications

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/70/70-pension-related_complaints.html

I'd have a read of the thread below though as it may actually have been financially beneficial to contract out especially below a certain age in which case you wouldn't qualify for any compensation

http://forums.moneysavingexpert.com/showthread.php?t=5347300

dunstonh

Orville wrote: »

Hi.

Just had an ad appear on my facebook wall (yeah i know) but it was asking if you had opted out and saying you can be entitled to compensation. They wanted to know what company etc. I never signed up as I would rather do it myself like I did with the banks.

Does anyone know anything about this and how I can go about putting in a claim if I am entitled...

thanks..

The FSA did a review of contracting out in 2007 (its not called opting out as that has a totally different meaning). It found a potential failure rate of around 1.5%. This review was before the pension freedoms and the move to the single state pension. Both of which have made contracted out decisions much more favourable.

A potential failure rate of 1.5% is very low. So, low that the FSA considered the issue closed. They did publish a guide though.
http://webarchive.nationalarchives.gov.uk/20100210151716/moneymadeclear.fsa.gov.uk/pdfs/s2p_wrongly_advised_ink.pdf

On page 4 there is a flow chart to see if you were part of that 1.5%. Effectively, if you contracted out before age 45 then you ok. If over 45, then you could still benefit but it would unlikely be for income reasons (other reasons could be planned earlier retirement, serious ill health, no spouse plus others).

The changes with pension freedoms and the single state pension mean that most people who contracted out are now financially better off by quite a bit. I was contracted out for 10 years but will still get the full single state pension. If I was contracted in for those 10 years I would still only get the full single state pension but wouldnt have a pot built up from those years contracted out.

Following the FSA review The claims companies stopped marketing contracting out of SERPS as a complaints reason. That is with the exception of just a handful. However, they are not doing it for the complaints reason (you cant be successful on a complaint win rate of 1.5%). They get all your pension information, put in a speculative complaint and then tell you to transfer the pension and take a fee for doing the transfer. That is where the real money is.

In the whole of 2015/16 there were just 300 enquiries regarding SERPS with the FOS (this can be missale complaints but also admin failures or other issues). These went on to 218 complaints of which just 16 of those complaints were upheld. A rate of 5%. It has the lowest uphold rate of any product class.

For the period of 2016/17 (which is not yet complete) there have been under 30 complaints about SERPS.

Its really not an issue and you need to be careful of the motive of the companies advertising this.

MiserlyMartin

I'm a bit confused now (not for the first time!) In 1997 I was advised to opt out of SERPS. So I did. 2 job moves later and with a new FA of the group scheme he advised me to opt back in, so I've been opted back in since about 2004. Since pension freedoms and the single state pension does this now mean its better to be out again? I'll be 68 in 2041 which I believe is the year I can get my state pension.

Orville

dunstonh wrote: »

Its really not an issue and you need to be careful of the motive of the companies advertising this.

Exactly the reason I posted here for advice from you guys.

I wouldn't touch them with a barge pole anyway.

So as a 44 year old your advice is to basically leave things as they are as I am currently better off..?

dunstonh

In 1997 I was advised to opt out of SERPS. So I did. 2 job moves later and with a new FA of the group scheme he advised me to opt back in, so I've been opted back in since about 2004.

When Labour got into power, they reduced the rebates significantly in the early years. So, by around mid 2000s the general view was to start contracting people in again if there was no other identifiable reason for contracting out. It was effectively cost neutral by then.

In their final years of power, Labour started to increase the rebate again and the 2006 pension simplifications made contracting out a bit more favourable (ability to take 25% tax free lump sum with contracted out funds but not contracted in. Plus, the ability to take the pension earlier than 60 was removed).

Since pension freedoms and the single state pension does this now mean its better to be out again?

The ability to contract out was abolished a few years ago in preparation for the single state pension.

I'll be 68 in 2041 which I believe is the year I can get my state pension.

You will be a winner from contracting out and the change to the single state pension.

So as a 44 year old your advice is to basically leave things as they are as I am currently better off..?

Correct. You too should be a winner from contracting out. The fact you are 44 now means you were below the pivotal age and it was the right thing to do.

Silvertabby

“ Its really not an issue and you need to be careful of the motive of the companies advertising this.
Originally posted by dunstonh ”
Exactly the reason I posted here for advice from you guys.

I wouldn't touch them with a barge pole anyway.

So as a 44 year old your advice is to basically leave things as they are as I am currently better off..?

This 'company' sounds really dodgy. To claim compensation, they would have to prove that you have lost money by contracting out - but given your age you will actually be better off, because:

A. When you contracted out you paid reduced National Insurance contributions.

B. You will have the benefit of the contracted out pension

C. Assuming you are still working/paying NI, you will now get the full £155 per week State pension.

I suspect that if you had responded to this advert, the next step would be an 'offer' to transfer your contracted out pension benefits to another scheme (for a price).

Orville

Many thanks guys.

I shall leave everything as it is.

Have a good New Year :-)