Opt out of SERPS/S2P?

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  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    could suggest where I could find out more about the pros and cons of continuing with the plan or should I re-join the SERPS?

    As mentioned on your duplicate post, this thread has all the info you need.
    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.
  • Annielou
    Annielou Posts: 89 Forumite
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    My sister, who is financially clueless + would admit it, opted out about 20 years ago during a short spell in employment, then had 2 kids and never worked again - but never did opt back into SERPS. She is now 43 with a silly little pension and has just now started a part time job which offers a company pension. She will join that stakeholder pension, but my question is whether she has really messed up her future by never opting back in and then earning nothing? And if she has, is there anything that can be done to lessen the damage? We would both be really grateful for any advice. (ps. i'm new to these forums so may be posting this in entirely the wrong place)
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    my question is whether she has really messed up her future by never opting back in and then earning nothing?

    No. As she wasnt working, she wasnt paying NI and therefore was only contracted out on paper and not in reality.
    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.
  • Annielou
    Annielou Posts: 89 Forumite
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    Thank u 'Dunstonh'. that answer might make her sleep at nights again now! i can't say i really understand it though, but i guess she just needs to opt back in now being 43 and starting to work again but being a low earner. thanks for your time in responding, v much appreciated
  • jem16
    jem16 Posts: 19,398 Forumite
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    Annielou wrote: »
    i can't say i really understand it though,

    SERPS is like the basic state pension - you actually have to pay contributions to be entitled to it. As your sister wasn't working she wasn't paying NI so was not building up any entitlement to SERPS. So it didn't really matter whether she was contracted out or not as she wasn't paying any NI.
  • Annielou
    Annielou Posts: 89 Forumite
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    Many thanks Jem16. I am sort of starting to get it now (I think). In a nutshell then, unless you work SERPS or Additional Pension is not relevant to you and you'll only ever receive the basic pension anyway?
  • jamesd
    jamesd Posts: 26,103 Forumite
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    That's right.
  • gratefulone
    gratefulone Posts: 173 Forumite
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    Could someone please tell me if it is worth contracting back in to SERPS now having contracted out (and stayed out since 1988)? Am in late 40's now. Know contracting out finishes in 2012 and was just wondering if it would be more advantageous to re-contract back in now instead of waiting until 2012? Any helpful advice would be appreciated. Thanks
  • jamesd
    jamesd Posts: 26,103 Forumite
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    If you're contracted out because you want the possibility of taking the pension before you're 65 or because you're single then you may as well remain contracted out for the remaining couple of years.

    If you're achieving greater than 7% growth in pension investment value that may also be a reason to stay contracted out, since your investment performance may be sufficiently better than the normally assumed level to make it better for you.

    Assuming you're 48 or so you're a little over the optimal age for being contracted out but not enough to cause concern because the expected difference between contracting in and out is still quite small at your age. If you value the flexibility or absence of a need for spousal pension provision then contracting out is likely still to be your best option even if it's on average expected to be slightly less good in long term pension income terms given average investment performance.
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    45 is the optimal age to contract back in for men. However, it doesnt suddently become bad to be out longer than that. It just means your investments have to work harder. Given the lower market prices compared to the last few years, that could make up for it somewhat. However, it depends on how you invest your money.

    you only have a couple of years left anyway as contracting out is being abolished in 2012.
    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.
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