SERPS....what does that mean?

MrsGJM

Please be gentle... I honestly don't know what I'm talking about!

Early 90's the company I worked for suggested serps...as I understood, a diversion of NI payments to enhance pension? Had no more idea then than I do now what it was all about, but heyho, in for a penny, in for a pound! Anyway, was employed there til 1999, then my second child was born and I didn't work again til 2005. Have worked constantly since then with no further thoughts to it, even though every year around my birthday I receive an HSBC report detailing the amount of my 'pension fund'. Each year there have been no contributions, the amount just seems to go up by interest/performance? So... I have no idea where my NI payments go...I have never opted out of "contracting out" yet my payments are obviously not going to this fund. With all the news about people not getting full state pension, I'm starting to get concerned..

. Can anyone explain it in language a financial imbecile might understand?

badmemory

As it is the middle of the night and the experts are probably enjoying "the sleep of the just" I will have a minor go!

Contracted out - paying smaller NI payments (means you earn no SERPS) usually because you have a company based final salary pension or defined benefit pension. The HSBC report may be to do with that pension (or indeed another pension you have contributed to in the past) and nothing to do with your state pension, as you no longer contribute to that DB? pension via the co you worked for there will be no additional contributions added.

What about a pension with the co you currently work for, they will at some point HAVE to set up pensions for their employees (auto-enrolment)

Finally your NI payments go partly towards funding your state pension, currently at £155 plus pennies per week. I suggest you find out how that is going & I am sure someone will be along to post a link for you. And to add to my amateurish efforts.

missile

SERPS is a relic from the past, see here > https://www.nidirect.gov.uk/articles/serps-and-state-second-pension

I would suggest you obtain a pension forecast here > https://www.gov.uk/check-state-pension

bigadaj

badmemory wrote: »

As it is the middle of the night and the experts are probably enjoying "the sleep of the just" I will have a minor go!

Contracted out - paying smaller NI payments (means you earn no SERPS) usually because you have a company based final salary pension or defined benefit pension. The HSBC report may be to do with that pension (or indeed another pension you have contributed to in the past) and nothing to do with your state pension, as you no longer contribute to that DB? pension via the co you worked for there will be no additional contributions added.

What about a pension with the co you currently work for, they will at some point HAVE to set up pensions for their employees (auto-enrolment)

Finally your NI payments go partly towards funding your state pension, currently at £155 plus pennies per week. I suggest you find out how that is going & I am sure someone will be along to post a link for you. And to add to my amateurish efforts.

Experts, sleep of the just, you're not in tune with the public mood ala Brexit, trump etc

bigadaj

MrsGJM wrote: »

Please be gentle... I honestly don't know what I'm talking about!

Early 90's the company I worked for suggested serps...as I understood, a diversion of NI payments to enhance pension? Had no more idea then than I do now what it was all about, but heyho, in for a penny, in for a pound! Anyway, was employed there til 1999, then my second child was born and I didn't work again til 2005. Have worked constantly since then with no further thoughts to it, even though every year around my birthday I receive an HSBC report detailing the amount of my 'pension fund'. Each year there have been no contributions, the amount just seems to go up by interest/performance? So... I have no idea where my NI payments go...I have never opted out of "contracting out" yet my payments are obviously not going to this fund. With all the news about people not getting full state pension, I'm starting to get concerned..

. Can anyone explain it in language a financial imbecile might understand?

Contacting out has now finished for everyone, it sounds as though you were contracted out for say seven or eight years.

Over that time you and your employer paid less NI as it went into your fund, but this mean you built up less state pension. If you apply for a pension forecast then the NI not paid will effectively be stated as a cope figure, this doesn't mean anything directly but is an indication of what reduction to your state pension has occurred due to contracting out.

The NI not paid has gone into a separate fund that has probably performed better than if it had gone into the state system.

However you may well be fortunate in that the recent changes to the state pension have ended contracting out and led to the single tier pension. Under the old system then someone contracted out would have got circa£120 for a working life, with the balance made up in their work pension. Someone not contract out would have got a higher figure but obviously not the work pension.

You have the opportunity to make up the difference now by continuing to work and accrue entitlement to state pension up to the £155 maximum figure. Those not contracted out still have to pay NI but don't gain any benefit once this maximum figure has been hit, so you may well be a winner on these changes.

MrsGJM

Thank you so much... These explanations have really helped.

So I've checked my forecast and NI record. Seems I have 38 full years, 1 year not full and 12 years left to contribute. My pension forecast is £145.22 based on NI up to April 16, and £155.65 if I contribute for another 3 years before April 28. The COPE figure is 10.54 pw estimated.

So just a couple more questions.... Does the COPE figure get deducted from the state pension figure on retirement? I always thought that 35 years was fully paid up, so to speak...If I'm paying 41 years, is that cancelling the contracted out period??

Also where do the auto enrolment pension payments I now make come into all this?

I thought I was getting to grips with it before I started typing this!!

molerat

The COPE has been used in the calculation of your Apr 16 pension figure, it will not be added or deducted again. However many years you had earned pre Apr 16 only 30, under the old system, or 35, under the new system, counted. Nothing will replace or cancel out the contracted out years, the COPE would be deducted from the 35 year amount. Your £145.22 is safe and going forward you can add to that up to the full £155.65.

As for your auto enrolment pension, that is completely separate and has no effect on your state pension.

MrsGJM

Thank you. So, in summary, as long as I contribute for at least 3 more years I should be able to receive the full state pension?

If that is the case, is there anything to stop me cashing in the HSBC pension fund early, say in 5 years, when I'm 60? It is not a hugely significant amount at the moment. Somewhere around £6000.

bigadaj

MrsGJM wrote: »

Thank you. So, in summary, as long as I contribute for at least 3 more years I should be able to receive the full state pension?

If that is the case, is there anything to stop me cashing in the HSBC pension fund early, say in 5 years, when I'm 60? It is not a hugely significant amount at the moment. Somewhere around £6000.

Yes that's about right.

You should be able to access your pension at any age over 55, 25% will be tax free and the rest added onto your other income and taxed at that marginal rate.

Loanranger

Can you live on just 155 pounds a week? That's about 8k a year.

Linton

MrsGJM wrote: »

Thank you. So, in summary, as long as I contribute for at least 3 more years I should be able to receive the full state pension?

If that is the case, is there anything to stop me cashing in the HSBC pension fund early, say in 5 years, when I'm 60? It is not a hugely significant amount at the moment. Somewhere around £6000.

Your summary of the State Pension situation is correct. And yes you should be able to easily cash in your HSBC pension at 60, assuming this was a simple pension that happened to be run by HSBC and not an employers pension because you worked for HSBC.