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Contracted out of SERPS - how do I know if this was right?
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zacepi
Posts: 53 Forumite
Having read some articles on mis-selling, I am wondering how I can tell if I would have been better off staying in SERPS rather than coming out as I was advised.
Briefly, I had a private pension in 2000 and had a meeting with a Financial Advisor (London firm, still in business). They advised to contract out and also change pension provider. The latter advice may have been exactly right as I was with Equitable Life, but I suspect I would be better off if I'd not opted out of SERPS.
I'm not saying it was mis-sold, but after a relatively simple way I can tell if I am now worse off for that advice. Or is there a general rule for an "average" paid person in a typical situation - mortgage, kids etc.?
Briefly, I had a private pension in 2000 and had a meeting with a Financial Advisor (London firm, still in business). They advised to contract out and also change pension provider. The latter advice may have been exactly right as I was with Equitable Life, but I suspect I would be better off if I'd not opted out of SERPS.
I'm not saying it was mis-sold, but after a relatively simple way I can tell if I am now worse off for that advice. Or is there a general rule for an "average" paid person in a typical situation - mortgage, kids etc.?
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Having read some articles on mis-selling, I am wondering how I can tell if I would have been better off staying in SERPS rather than coming out as I was advised.
Any recent articles? Or are the ones you have read from before the period when the FSA carried out a review which killed the SERPS misselling claims off?
Virtually everyone is better from contracting out via a personal pension.
1 - contracting out allows access to your pension from age 55. Contracting in only from state pension age
2 - contracting out allows the pension to be taken as a lump sum or flexible. No lump sum or flexibility if contracted in.
3 - on death, your contracted out fund can be passed to beneficiaries. No fund to pass on if you contracted in.
4 - The reduction of qualifying years required to get the full state pension means some people have contracted out and are still receiving the full state pension in retirement.
The FSA review found a very low rate of people may have been missold. The failure rate was under 1.5% of cases. A failure rate that low is very good. Most products cant come close to that. Indeed, contract out of SERPS has the lowest success rate on complaints at the Financial Ombudsman Service. And since the CMCs stopped taking complaints in that area (apart from a couple of dodgy ones that use the pension info they obtain to market to you and make their money there) the volume of complaints about contracting out have fallen away.r is there a general rule for an "average" paid person in a typical situation - mortgage, kids etc.?
If you were under the age of 45 and earning over £10k a year at the time of sale then you are unlikely to be have been missold and contracting out was suitable. The amount and contracting out age changed over the years (in periods of good rebates, the age was later and the amount lower) but £10k under age 45 is worst.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
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If you were under the age of 45 and earning over £10k a year at the time of sale then you are unlikely to be have been missold and contracting out was suitable. The amount and contracting out age changed over the years (in periods of good rebates, the age was later and the amount lower) but £10k under age 45 is worst.
Thanks dunstonh, that's extremely helpful and I do fit into the first category, so my mind is at rest.
What a great forum!0
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