Contracting out of SERPS

Jane_Hodgkiss

Hi there,
I am confused about this. Back in the 80s I was advised by an insurance broker to contract out of SERPS which I did. Now I hear that you can reclaim this money? Was this incorrect advice? Has this affected my pension? Should I/Do I need to do anything about it? Aargh.....

[Deleted User]

Sounds like more of a pension question than a PPI one...

dunstonh

Now I hear that you can reclaim this money?

No. In fact, SERPS has the lowest uphold rate of any financial product listed by the FOS.

There are about 3 claims companies active in putting in frivolous complaints about SERPS. The uphold rate is around 1.5%. (i.e. 98.5% fail).

To put some numbers on that, SERPS had 112 complaints at the FOS in 2016/17 and 92 over 2017/18. For context, investment ISAs had 1261, cheque clearing had 491.

The CMCS that try it on use it as an excuse to find out about your pensions and then try and sell you an alternative taking 5% of your pot at the time.

Was this incorrect advice?

The SIB did a review of contracting out back in 1996. It found that everyone that had contracted out by then was financially better off.

Labour started to reduce the rebates when it got in power (a stealth tax) and it made contracting out less attractive and by around 2006, for those contracted out between 1997 and 2006 was largely cost neutral. Labour did increase the rebates again towards the end of their time in power.

In 2006, the ability to take contracted out benefits earlier was introduced and the ability to take 25% TFC (if you contract in, you get no TFC and you have to wait until state pension age).

In 2015, the ability to take contracted out benefits flexibly and pass on to your children or other beneficiaries was introduced. Plus, with the new state pension, many are finding that the contracted out period has effectively become free money. For example, I was contracted out for a number of years but qualify for the full state pension (the contracted out years being replaced with contracted in years).

As it stands, contracting out has ended up being a very good outcome for the vast majority of people.

Should I/Do I need to do anything about it?

Be happy you contracted out.

AnotherJoe

Jane_Hodgkiss wrote: »

Hi there,
I am confused about this. Back in the 80s I was advised by an insurance broker to contract out of SERPS which I did. Now I hear that you can reclaim this money? Was this incorrect advice? Has this affected my pension? Should I/Do I need to do anything about it? Aargh.....

Yep, you will get a bigger one. Thank that broker.