Serps compensation

liz2502 · 8 February 2007 at 3:49PM

I opted out of serps for a pension with Standard Life in April 1987 and back in again April 2003. My friend tells me I could be due compensation due to poor performance. Is this correct and if so how do I go about it? Any advice would be appreciated. Thanks

dunstonh · 8 February 2007 at 5:10PM

My friend tells me I could be due compensation due to poor performance. Is this correct

That is incorrect. It is not possible to register a complaint due to poor performance. If you did that, it would be rejected.

Even if you made a complaint in an area that is valid and is upheld, you dont get a penny paid to you. Pension redress involves altering the amount paid into the pension.

On what grounds do you have for thinking that contracting out is a mis-sale?

liz2502 · 8 February 2007 at 5:35PM

I hadn't even given it a thought until my friend said this. It seems that if one contracted out of serps the return on your pension was much less than if you had remained in serps. The FA who sold it to me certainly said it would be more beneficial to opt out. I still have a lot of homework to do hence the reason for my post on this site.

EdInvestor · 8 February 2007 at 6:16PM

Were you advised when you were sold the policy that if you opted out there was a risk you could get less than if you stayed in?

Were you aware the money was invested in the stockmarket,and were you quite comfortable about that?

These are the sorts of issues that might indicate a mis-sale.

Step 1 would be to get a maturity forecast of your retirement pension from SL and a state pension retirement forecast from https://www.thepensionservice.gov.uk

This should enable you to work out if there will be a shortfall.

dunstonh · 8 February 2007 at 6:41PM

It seems that if one contracted out of serps the return on your pension was much less than if you had remained in serps.

In 1996, everybody who contracted out was better off. In 2002, everyone that had contracted off was worse off. In 2006, about one third are better off again. The main issue there is the short term effect after the stockmarket crash with the decline and recovery.

There are negatives to being contracted in as well as some risks. This is not a nil risk vs an investment risk issue. The regulator has instigated a review and has reported that it has found no widespread mis-selling of contracting out. However, it has identified a couple of hundred thousand individuals who were contracted out outside of the typical ages. The FSA intends to announce what action will be taken in the spring. It is expected that they will tell the companies to review these cases for the advice given at the time.

1987 is pre regulation so you are potentially hampered on that point.

You still may be better off. If you want a 25% lump sum from your SERPS/S2P, you can only get it if you contract out. If you want the pension earlier than your state retirement age (whatever that ends up being) you can only get that if you contract out. If you invest the money in a decent medium risk spread or higher then you have the potential to end up with more income than contracting in. The Govt have reduced SERPS/S2P benefits four times since it was introduced. Those that contracted out have never suffered a clawback in each of those cases. The Govt could abolish SERPS/S2P in favour of a single state pension (was proposed at one point) in which case all those contracting in would lose the benefits accrued but those contracted out would keep them.

So, its not a clear cut decision.

Serps compensation

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