Contrcated out of SERPS

NicolaJK

Hi, I took out a private pension with Allied Dunbar (or it could have been Prudential, who were then taken over by Allied Dunbar) in 1991 and was advised to contract out of SERPS. I was badly advised on both counts as I believe I should have been advised to join the local government pension scheme at that point as well, not go ahead with a private pension.
I did join the local government scheme in 1992 and froze my private pension, then believing the local government scheme would take my SERPS too. Allied Dunbar became Zurich and my yearly statements were always about the money I'd paid in and no mention of the SERPS. It was only when I tried to consolidate a few workplace pensions a few years ago I discovered that Zurich had my SERPS fund!
It's now consolidated into a frozen pension with Aviva as I'm now with a new employer who set people up with the People's Pension. I am concerned that I have missed out financially having contracted out of SERPS for so many years.


Can anyone advise?
Kind regards
Nicola

hyubh

NicolaJK wrote: »

I took out a private pension with Allied Dunbar (or it could have been Prudential, who were then taken over by Allied Dunbar) in 1991 and was advised to contract out of SERPS. I was badly advised on both counts as I believe I should have been advised to join the local government pension scheme at that point as well, not go ahead with a private pension.
I did join the local government scheme in 1992 and froze my private pension, then believing the local government scheme would take my SERPS too.

Once you joined the LGPS, you were contracted out of SERPS from that point since the LGPS was itself a contracted-out scheme, on a salary-related basis. Your previous period of contracting out on a money purchase basis would have remained as it was however unless you had explicitly transferred the Allied Dunbar pension into the LGPS.

It's now consolidated into a frozen pension with Aviva as I'm now with a new employer who set people up with the People's Pension. I am concerned that I have missed out financially having contracted out of SERPS for so many years.

There are two separate issues here:

1. Not joining the LGPS as soon as you were eligible. That was definitely a mistake in hindsight.

2. Before you were eligible for LGPS membership, contracting out of SERPS on a money purchase basis. Assuming this scenario did happen (it's a bit clear from your original post), then the chances are this was actually a good decision in hindsight since you are now left with a small money purchase pension you can take flexibly from age 55 yet still accrue the equivalent of SERPS (i.e. the new single-tier amount above the old basic state pension level) from April 2016 onwards.

jamesd

It's extremely unlikely that you will lose out from being contracted out. Each person had a foundation amount of state pension entitlement calculated for April 2016. Years after that add 1/35th of the flat rate per year.

A person who wasn't contracted out would just have been at or over the cap by April 2016 so won't be getting any increases for later years.

A person who was mostly contracted out would be below the cap and will be able to increase their state pension. In addition they get their private pension and whatever portion of their defined benefit pension is due to being contracted out while a member of that.

So those who contracted out are likely to be ahead of those who didn't by the value of their private pension.

Depends on the numbers of years before and after 2016 that are available and whether contracted in years for the contracted out person before 2016 took them over the flat rate maximum. But in general the contracted out people are substantial winners.

NicolaJK

Thank you. That makes sense. Yes, getting to it at 55 will be a plus!

Silvertabby

Thank you. That makes sense. Yes, getting to it at 55 will be a plus!

Are you still in the LGPS? If not, and if you left before April 2014, then the earliest you will be able to access it will be 60.

NicolaJK

Hi Silvertabby,
I have 10 years worth of contributions in LGPS, but another bigger pot of consolidated pensions with AVIVA so I'm presuming I could access that private one at 55 if needed?
Regards
Nicola

xylophone

You have a deferred LGPS pension?

https://www.lgpsmember.org/arl/already-left-when.php

You have an Aviva pension into which you consolidated the SERPS pension?

You have a People's Pension?


You will be able to access the Aviva from (currently) age 55.

The People's Pension can be accessed from (currently) 55.

https://thepeoplespension.co.uk/employees/your-retirement/all-your-choices-at-retirement/compare-retirement-options/

NicolaJK

That's right Xylophone. LGPS is deferred.
Is it worth transferring my Aviva into the People's Pension so it's all together?
I also have 4 years contributions to a final salary scheme with a charity. I've left that alone for now. Is that the right thing.
Makes my head hurt!
Regards
Nicola

xylophone

I also have 4 years contributions to a final salary scheme with a charity.

When did you work for the charity? What is scheme pension age?

Are you receiving annual statements?

How is it revaluing in deferment? Will it be index linked in payment?

Is it worth transferring my Aviva into the People's Pension so it's all together?

You would need to compare one with the other in terms of fees and charges/investment choice etc.

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension