I need to make a decision!

Money_Mad_3

I have received a letter from the Prudential about contracting out of state second pension and I need to make a decision as to whether to opt back in.

As "there is a high risk you will be worse off if you remain contracted out of the State Second Pension"

differences as they have put it, I'll try and shorted the message

contract in contract out
received weekly pension from 65 from 55

no tax free sum from serps take 25% tax free

rec'd set level of pension from government pension is not guaranteed

state provides pension for spouse when you die when taking benefits buy
another pension for spouse

estate will not benefit if benefits not taken benefits used for spouses
pension



Is it all a load of rubbish or what!!!!!!!!!!!!!!!!!!!!

dunstonh

Is it all a load of rubbish or what!!!!!!!!!!!!!!!!!!!!

Why do you think retirement planning is a load of rubbish. I am sure you wont feel that way when you get to retirement.

As to the letter; Insurance companies that sold the contracting out pension in the first place have been issuing these letters for some time now. Its not necessarily done for your benefit but for theirs. Its a way of limiting liability of complaint and redress. For example, you get to 65 and find that your friend is £1000 a year better off by contracting out. Yours though is £1000 a year worse off (in reality the spread is around 50/50 better/worse off with the average shortfall £2 a week for those worse off). So you decide to complain because you are worse off (not that this is a valid reason for complaint but it will still be looked at). The insurance company will respond that "we told you in Feb 2008 that there was a risk and we did the same every year". So therefore you knew there was a risk and you decided to stay contracted out".

Some people will benefit from contracting out. Some from contracting in. Neither issue is risk free and its a decision on which you prefer.