What was SERPS and where did my pension contributions go to?

michaels

GunJack said:

However you look at it, there was and is a max state pension under new and old schemes. You sound like your 2016 starting amount was probably based on the "old" system so you have not lost out on anything, whatever that amount was you got even if it was over the max new sp. Whatever pension scheme you've in since contracting out stopped is on top of that and probably worth more than the serps you could not have accrued in the same time...

No one started new sp worse off than what they had accrued under the old system

Wrong. 

Under the old scheme I had a standard pension provision that could grow plus a serps provision (based on extra contributions that I could have contracted out but didn't).

Under the new scheme I had a fixed amount that was the same with no option to increase my standard pension amount because it was already at the maximum.  Thus I got zero value from those SERPS contributions that I thought were earning me extra pension (hence having not chosen to contract out).

With the SERPS money there were two choices, invest in extra government pension or invest in extra DC pension.  Chose the former and the extra entitlement was removed by state diktat, chose the latter and it was retained.

xylophone

Under the new scheme I had a fixed amount that was the same with no option to increase my standard pension amount because it was already at the maximum.  Thus I got zero value from those SERPS contributions 

You got exactly what you had accrued up to 6/4/16.

If that was precisely £155.65 (was it), then the whole of that pension has been  revaluing under the triple lock (apart from one year).

It was and is the case that once full NSP is reached, while if earning the requisite amount and under SPA, you must continue to 

pay NI, even though those contributions do not increase your SP.

But once a person who contracted out reaches full NSP, he too must continue to pay NI while in the same situation.

Triumph13

michaels said:

Triumph13 said:

michaels said:

Linton said:

michaels said:

Linton said:

Omichaels said:

xylophone said:

The government confiscated your serps and s2p payments when they changed the pension rules.

OP, accurate information re New State Pension  which was introduced 6/4/16 - full NSP was £155.65 at inception.

https://assets.publishing.service.gov.uk/media/5a7a21fd40f0b66a2fc00201/single-tier-pension-fact-sheet.pdf

 Guide produced by the government to explain it to the general public.

TLDR - if you had accrued serps / s2p to take you to the level of the new state pension then you were left in the position where any further NI you paid accrued you precisely nothing whereas if you had instead previously opted out you would have a nice DC pot and then be able to earn the rest of a full state pension via your future NI payments.

!!!!!! Turpin wore a mask.

Wrong.  If you had accrued more than the new standard SP prior to 2016, you kept it.

Secondly, the transfer from the old basic pension to the new standard pension was said to be cost neutral. So those with higher wages lost the opportunity to raise their SP to very high levels whereas the lowest paid gained. More Robin Hood than Richard Turpin.

So perhaps they should have reclaimed the opted out money if it was merely an attempt to grab the pension entitlement that those who had paid extra NI had been told they were accruing?

Not rocket science, NI above a certain level I had the choice of investing into SERPS/S2P or a contracted out pot.  I chose the former and had the accrued pension that I was promised effectively removed.

From my understanding SP is accrued each year uprated by the general SP factors. Nothing you had already accrued for was removed.  In April 2016 the calculations were made under the old and new rules and the higher of the two was used going forward, So if anything you gained.

What you lost out on was what you may have thought you would accrue in the future which is a rather different matter. No rules are fixed permanently for the indefinite future.

Nope - that could have been achieved easily by freezing what I had accrued when the change happened as a SERPS amount and a state pension amount.  I would not have yet reached enough contributions for full state pension but would have done so with future years contributions.  I would then have had my supposedly accrued SERPS on top of whatever state pension I eventually wound up with.

As above, had I opted out I would still have the money invested in extra pension.  Not opting out I instead had the accrued pension removed.

Only to the extent that the accrued pension exceeded the difference between full old and full new pensions.  If your accrued pension was less than that, then you actually got an increase.  Yes, others did better, and yes you might have done better if you had opted out if you do end up working enough post 2016 years.

Think you mean the other way around, if you were above new state pension you got to keep the excess but had everything below that clawed back each extra year you then worked.

Fair would have been you keep your SERPS/S2P accruals and state pension level accrued at he switch over date, then earn more state pension based on any further contributions - what effectively happened for those who had opted out.

Nope.  You are ignoring the fact that people got a generous bump in the amount of the standard pension.  Yes, the rules changed and impacted your ability to earn even more if you kept working long enough, but you got to keep everything you had accrued to 2016 and, if you were below the max, each subsequent year until you did reach the max was worth more.

I sympathise with you that, in your particular case, because you are continuing to work after reaching max SP you would have been better to have contracted out, but them's the breaks.

af1963

It's often helpful to think about twins making different decisions.  If michaels had a twin brother who had opted out of SERPS into a private DC scheme while making identical choices for everything else, the brother would probably now have the same state pension entitlement as michaels, but also a DC pension pot funded from the opted-out contributions.

Effectively, people in michaels's position found their voluntary SERPS payments were used to complete their SP entitlement instead of the NI contributions that they paid after 2016, which became worthless for earning more pension.

I'm in the position of the 'lucky twin' and I'm well aware that I'm one of those who gained from the new system.  But there's no point in pretending that some people - including michaels - didn't lose out. And it wasn't through any negligence on their part (unlike, for example, people who failed to read newspapers or watch TV for 30 years ...)

xylophone

But there's no point in pretending that some people - including michaels - didn't lose out.

No one is pretending that there were not winners and losers in the transition to the new state system.

Actually, some of the losers were those who had contracted out for most or  all of their careers and reached SPA within a year or two of inception of new state pension.

They did not have the time to improve their starting amounts through post 6/4/16 contributions.

If they had pre 88 GMP, their occupational scheme was not obliged to increase it in payment and the mechanism by which it was increased through SP was lost in the new system.

But aside from considerations of winners and losers, michaels has made statements which are quite simply misleading for those who come on to the forum seeking guidance/comment on how the new system operates.

hyubh

Can't believe people are trying to argue the tee-oh-double-ess against michaels. Do you all have healthy DB pensions or summat...? Almost everyone in full time contracted in employment would accrue more state pension under the old state pension. The functional equivalent of BSP+SERPS is not the post-16 state pension alone, but that + an auto-enrolment DC occupational pension...

pterri

*butts in* there are 65milion people in the country, no policy change will benefit everyone 100%. Most of the time it’s a case of benefiting more people than it disbenefits. There will be edge cases but it’s very few. 

Silvertabby

SERPS was introduced in 1978 to give extra retirement income to those without access to company DB pensions.  Including those who were eligible for company schemes, but who failed to meet the (then) 5 years vesting period.  Leavers would have their own and their employer's NI rebates paid over to HMRC/COEG in order to give them SERPS benefits for that period.

Contracting out ended in 2016, the plan being that employees without current access to occupational pensions would at least have an auto enrolment DC scheme - but they went wrong by permitting opting out.  The result will be that habitual opters out will then retire on nothing but the new single tier pension, which is set at a couple of pounds over the pension credit means test limit, but still not enough for a reasonably comfortable retirement.

michaels

xylophone said:

But there's no point in pretending that some people - including michaels - didn't lose out.

No one is pretending that there were not winners and losers in the transition to the new state system.

Actually, some of the losers were those who had contracted out for most or  all of their careers and reached SPA within a year or two of inception of new state pension.

They did not have the time to improve their starting amounts through post 6/4/16 contributions.

If they had pre 88 GMP, their occupational scheme was not obliged to increase it in payment and the mechanism by which it was increased through SP was lost in the new system.

But aside from considerations of winners and losers, michaels has made statements which are quite simply misleading for those who come on to the forum seeking guidance/comment on how the new system operates.

They could have separated the SERPS entitlement from the basic state pension entitlement which would have been fair to both those who contracted out and those who did not. 

I thought I was accruing extra pension though my SERPS contributions, if it had been in a private scheme I don't think people who suddenly had their accrued pension removed would have just said 'oh well, some you win, some you lose'....

Ocelot

AIUI, if you contracted out you paid less NI and the difference went into an occupational scheme.

If you didn't contract out, after 2016 your accrued SERPS were frozen but not lost.

In 2016 contracting out was abolished for DC pensions, so all subsequent NI was at the same rate, whether previously contracted out or not, but the additional NI paid after this year was no longer going into a second pension, so everyone was paying more NI for no additional gain.