SERPs

[Spectric]

The older folk round here will remember SERPs or State Earning Related Pension that many of us opted out of. There are conflicting ideas about how this effects the state pension so anyone round here can give any straight answers ?

Idea 1: You get an extra SERPs payment because you opted out .

Idea 2: Because you opted out your got less contributions paid into the state pension so you needed more full years to get back to full state pension.

Idea 3: It has not impact anymore because it was scrapped.

 

[Blackswanwood]

This will help:

https://www.unbiased.co.uk/discover...does-serps-affect-the-state-pension-i-receive

A source of free advice on what it means for you is Pensionswise - you can book a free consultation.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Hope that helps

 

[DrPhill]

The older folk round here will remember SERPs or State Earning Related Pension that many of us opted out of. There are conflicting ideas about how this effects the state pension so anyone round here can give any straight answers ?

Idea 1: You get an extra SERPs payment because you opted out .

Idea 2: Because you opted out your got less contributions paid into the state pension so you needed more full years to get back to full state pension.

Idea 3: It has not impact anymore because it was scrapped.

I am not a tax advisor.
I can tell you what I experienced, though and you can draw your own conclusions.
I opted out for a few years. It seems that for those years I did not make enough contributions to qualify for a full year of contributions.
I needed to make up those years (though this was relatively easy as the opt-out years were few, and my other working years were many).
I retire this year, in case that helps to match your cohort (group of people with the same age experiencing the same pension regulations).

 

[deema]

I didn’t opt out, I discovered when they scrapped it they just used my contributions to pay for future years of contributions. It was a complete smash and grab raid on my contributions, I was furious.

 

[Spectric]

So from this and the links to info it would appear that idea 2 is correct, opting out of SERPs had a negative impact on your state pension but it was hoped your company pension with the extra payments would offset this to give you a better income but did this really ever work. So in theory your state pension shortfall due to contracting out would diminish for every full year your paid you NI contributions until the point you would receive the full amount.

 

[deema]

I would say opting out would have been far more advantageous, I would have received a pension for my SERPs contributions in the private sector. Keeping Serped in meant I lost all my Serps contributions. Before I was 50, my Serps had been used, when the scheme was stopped to ‘buy’ sufficient years contributions that I need not pay anymore ever and still receive a full state pension. So every year thereafter I was over contributing to my pension, ie it was a snatch and grab by Mr Brown on my pension fund. I will receive no enhanced pension as a consequence of my Serped in.

 

[Richard_C]

"Once upon a time" I knew all this stuff, but memory has faded. I do remember where to look to find it though.

Also "Once upon a time" we had the pension advisiory service, TPAS, but that was combined into the Money and Pension Advisory Service, MAPS which is wholly independent and government funded. As others have said, their 'user' website is moneyhelper.org.uk.

This page is particularly useful, scroll down and it tells you a bit about GPS, SERPS and so on.

https://www.moneyhelper.org.uk/en/p...state-pension-work-and-how-much-might-you-get

This short and specific page covers serps contracting out.

https://www.gov.uk/contracted-out

Contracting out didn't always end your NI contributions, for some periods it just reduced them.

Youcan see historic rates back to 1999 here:

https://www.gov.uk/government/statistics/main-features-of-national-insurance-contributions

If you were working for an employer which had a defined benefit pension scheme, also called final salary or sometimes career average scheme, it is likely you were contracted out of SERPS, but that has no effect on your basic state pension. In return for the lower employer and employee NI contributions from contracting out the pension scheme had to meet certain minimum standards, originally the guaranteed minimum pension but later the reference scheme test. So contracting out wasn't an easy ride for employers, it just gave them some help with the SERPS was there so that people who had decent earnings but didn't work for a big employer, or didn't choose to contract out and start a personal pension, could accrue something more than the basic state pension. Again though, whether you were contracted in or out had no impact on basic state pension. But it does, after Osborne announced muich higher basic pension paymnets from 2016? there was a quiet caveat - not in his announcement. If you had contracted out you won't get the full new higher rate pensiuon he boasted about. And the indexation of GMP in payment stopped.


All this is a minefield. You can call the moneyhelper people, and if you have not yet reached state pension age you can - should even - get a pension forecast. It used to be a form - BR19 - but now you can do it through the Government gateway. It will identify the elements - basic, serps, gps - and a total.

https://www.gov.uk/check-state-pension

It's all a lot simpler now, not necessairly better, but those of us of certain age still have a mish mash of historic benefits.

Take care - there are many sharks swimming in the sea who are only too happy to take your money for advice or management. Make sure you work through the moneyhelper site or the officlal governemnt site, not any imitations. If after getting the basic facts you then choose to pay for advice thats up to you, but start simple and start with the ones suggested.

 

[Sideways]

I did contract out of SERPS.
I have a full 30 or whatever years of contribution to the pension system so In that sense I get a full pension, but it isn't, it's reduced because of contracting out.
I have the option to buy, in my case three more years of state pension contributions and that will increase my pension upto to the higher rate maximum.
The cost of the extra years vs the weekly increase I'll get means it pays back in 3 years. As long as I make it to 70, it's a good deal.

The cost of the extra years actually varies. Older years are cheaper than more recent years. But you can only go back 10 years. So depending if and when you may have had some time not earning, the cost of topping up varies. Check into it promptly. There are websites to guide but ultimately the only way to get an exact price is to request a quote from HMRC. Again in my own case, I need to buy my top up by the end of the current tax year otherwise it will cost a little more.

 

[skeetstar]

My employer contracted me out of serps.
I think I still paid the standard NI contribution. Wife and I now get our state pensions, and she gets a larger one than I do. Being employed for all my life till retirement, I have more qualifying years of NI payments than she does.

 

[bryan267]

Option 3 is the closest to being correct.
The old state pension that allowed for additional SERPs pension was scrapped in favour of the current "New State Pension". What ever will they call the next one?

If you had contributed to SERPs you would lose it as new state pension is more than the old.

If you contracted out you are the winner, you have some national insurance contributions tucked away in a pension in your own name. And they abolished the silly rules about what type of annuity you had to buy, you can even cash it in if you want, although flexibly accessing your pension might lead to reduced future contribution limits, always take advice.

As an adviser we were forced to tell people to contract back in for about 10 years leading up to this change, because the private pension growth couldn't equal the triple lock.

Bryan

 

[sploo]

I understood "Idea 2" to be the truth; though for me personally (who did opt out) I'm "young" enough that I'd still have enough years of contributions to end up getting the full state pension.