Miss sold contract out?

missile

My MiL is a 75 year old widdow. She has £214.92/week total pension >

basic state pension £90.70
Pre 97 additional state pension £107.54
Less Contracted-Out Deduction £45.47
Graduated retirements benefit £2.91
Private pension £59.24 (£3,080.40 annual pension)

Until he died, her husband contributed 5+% of his salary in addition to the contracted-out rebate. She receives 50% of his pension entitlement from his employers final salary scheme.

It seems she would have been better off had he not contracted-out? Does she have a claim for miss sold pension?

dunstonh

Does she have a claim for miss sold pension?

There is no mis-sale. The contracting out is linked to the final salary scheme. Most of which are contracted out.

It seems she would have been better off had not contracted-out?

That would have meant not joining the final salary pension scheme and doing a personal pension instead which would be a mis-sale.

The benefits on the final salary scheme for the 5% contribution (thats 5% before tax relief) would signficantly outweigh the small loss of second state pension/serps absorbed into the final salary scheme.

missile

Perhaps I did not explain it correctly. I understand he was advised to contract-out when he joined the company scheme.

I believe she would have been better off with 50% of his employers original scheme/a private pension, plus the extra £45.47 had he not contracted-out.

dunstonh

Perhaps I did not explain it correctly. I understand he was advised to contract-out when the scheme was revised in '97.

You said it was a final salary scheme. In which case there is no choice to contract in or out unless it is one of less common contracted in final salary schemes.

Was the contracting out down through an appropriate personal pension plan with an insurance company?

I believe she would have been better off with 50% of his employers original scheme/a private pension, plus the extra £45.47 had he not contracted-out.

If the employer's scheme was final salary then he wouldnt have been able to do a personal pension (and as above contract out unless its a contracted in final salary scheme). Had a personal pension been recommended instead of the final salary scheme then that would have been a mis-sale. The very thing you appear to be suggesting should have been done.

Can you clarify the types of pensions that were held. That is really what it comes down to as I have impression that you are talking about final salary schemes and not personal pensions.

missile

It is a final salary scheme.

She gets £59.24 from the scheme, had he not been contracted in she would have received £45.47 SP2. It seems most unfair than in return for many years loyal service and contribution to the scheme, she receives £13.77 more than if he had contributed nothing.

I did not suggest anything, other than she is getting a very poor return for his savings.

dunstonh

It is a final salary scheme. The scheme was modified in '97 when he was advised to contract in.

If the scheme was modified in 97 to allow contracting in to take place and that is what happened, then I cant see any mis-sale.

It seems most unfair than in return for many years loyal service and contribution to the scheme, she receives £13.77 more than if he had contributed nothing.

If the scheme contracting out was compulsary until 1997 then it would mean that he would have got less (and in turn your MIL) as the final salary scheme income is far higher than the contracting out chunk lost.

Remember that contracting out through a final salary scheme is different to to contracting out using a personal pension.

missile

She is only £13.77 better off than she would be if he had made no contributions to the scheme, not what I would describe as far higher.

It may not be a mis-sale, but it certainly seems (to me) a very poor return for his contributions.

dunstonh

Which insurance company did he use for contracting out?

missile

Sorry, I have not explained this terribly well. He was an employee of Stena Drilling limited and contributed to their final salary scheme for many years.

Many thanks for your comments.

dunstonh

because contracting out means something different with final salary schemes (where you dont get the choice) and personal pensions (where you do) it can be confusing.

You have to look at the benefits of the final salary scheme. Some of which is there because of the contracting out.

EdInvestor

Isn't your mother better off with the company pension plus the lower additional state pension than she would be if she received the larger additional pension alone?