Pensions

[Region3]

A bit of a strange post here, but is there anybody here who knows about how pensions work, specifically about how they used to work around the time people were given the choice of opting out of SERPS up until the new workplace pensions came into effect?

To avoid possibly getting lost in a sea of conflicting information I don't want to post my questions here, but if anybody would be willing to talk to me via pm I would greatly appreciate it.

Thanks.

 

[jdpjamesp]

Good luck mate. Pensions are a world of hurt. Particularly when they aren't making any money!

 

[fundy]

Gary

I have some knowledge from an accountants perspective of dealing with pension providers on behalf of companies, happy to try and help if i can

 

[PhilTheFragger]

Richart is yer man
Send him a PM
But he might charge you, the tight wad

 

[Aztecs27]

Workplace pensions are the bane of our life here at work. We process the payroll for approx 200,000 people a week across multiple companies and from what I can gather, the Payroll team find it an absolute nightmare.

 

[Region3]

It's really not a technically difficult question, more of just straightening out someone's head who's never really understood how it worked under the old system.

Thanks for the replies, someone has kindly messaged me and I've fired back my confusion, so hopefully all sorted. Cheers guys.

 

[Doon frae Troon]

As a simple reply.
What ever you payed into the state pension outside of Serps you get as your share of the state pension.

EG I worked 23 years outside Serps [25 years within] and bought a couple of additional years to qualify for a full state pension.
This was quite a pleasant surprise to me as I thought I would get peanuts from the state pension.

I know that the pension rates have changed recently so best see an expert.
The State pension phone line/ interwebby folks are very helpful and will give you a projected figure.

 

[Fish]

A bit of a strange post here, but is there anybody here who knows about how pensions work, specifically about how they used to work around the time people were given the choice of opting out of SERPS up until the new workplace pensions came into effect?

To avoid possibly getting lost in a sea of conflicting information I don't want to post my questions here, but if anybody would be willing to talk to me via pm I would greatly appreciate it.

Thanks.

I've got a good personal financial advisor that's been with me for over 30 years now, if you want to speak to him I'll happily get him to call you, he'll answer any of your questions for you, it'll just cost me lunch next time I meet him, won't cost you anything 😉

 

[Region3]

As a simple reply.
What ever you payed into the state pension outside of Serps you get as your share of the state pension.

EG I worked 23 years outside Serps [25 years within] and bought a couple of additional years to qualify for a full state pension.
This was quite a pleasant surprise to me as I thought I would get peanuts from the state pension.

I know that the pension rates have changed recently so best see an expert.
The State pension phone line/ interwebby folks are very helpful and will give you a projected figure.

I've got a good personal financial advisor that's been with me for over 30 years now, if you want to speak to him I'll happily get him to call you, he'll answer any of your questions for you, it'll just cost me lunch next time I meet him, won't cost you anything 😉

Thanks, but it won't come to that as it's not advice I need.

It's the equivalent of me teaching my daughter basic algebra.

Quite embarrassing for someone who thinks of themselves as halfway intelligent.

 

[Mattyboy]

Workplace pensions are the bane of our life here at work. We process the payroll for approx 200,000 people a week across multiple companies and from what I can gather, the Payroll team find it an absolute nightmare.

It's not so much the payroll side, as decent software can do that. It's more about 33 new tasks that employers have to do to meet their legal duties (mostly, every time they pay staff) - or risk being fined or worse. Also, there is a fair amount of scope as to how employers achieve this, so with the right planning and solutions, it can result in a positive outcome for the business concerned.

Anyone is welcome to pm me on this, or any pension related issue. (I am an FCA qualified and authorised financial adviser, specialising in employee benefits btw!).

 

[gregers]

i was told by a pension guy,that all of us that had opted out of serps would automatically be opted back in??

something of a loophole that has now been closed.

 

[Mattyboy]

i was told by a pension guy,that all of us that had opted out of serps would automatically be opted back in??

something of a loophole that has now been closed.

Correct, assuming CO was via a money purchase scheme. What's the loophole.

 

[gregers]

wots a co and money purchase scheme??

the loophole from what i was told,
you opted out of serps and a portion was paid into your private pension,about 10 years from your retirement you opted back into serps and then you were entitled to a full state pension,BUT you were also entitled to the private pension that had matured.so in essence the good ole taxpayer paid you sort of twice,hence the loophole.
that is what was explained to me at the time,so it may well be bull crud.

 

[Mattyboy]

wots a co and money purchase scheme??

the loophole from what i was told,
you opted out of serps and a portion was paid into your private pension,about 10 years from your retirement you opted back into serps and then you were entitled to a full state pension,BUT you were also entitled to the private pension that had matured.so in essence the good ole taxpayer paid you sort of twice,hence the loophole.
that is what was explained to me at the time,so it may well be bull crud.

I dont remember that one (but there were age related rebates back in the day which meant that there were ages to contract out and back in). Whether or not you contracted out of SERPs has no effect on your basic state pension. That depends on the number of years that you paid national insurance. It reduces your SERPs pension however (or State second pension as it is now called).

As it turns out, pension freedoms from April 15 mean that although those that contracted out could be worse off, the flexibility now available has possibly made it a nice outcome.

Having said all that, the system is changing and there will be only be one state pension going forward. Simplicity = saving government money IMO. Also IMO, the next stage will be to start to reduce the state pension by roughly offsetting what the workplace pension would provide (although this will be in some years time).

 

[Tashyboy]

Bit I don't understand is that I have paid into a company pension for the last 36 years. Which has enabled me to retire.
However I have paid NI contributions for the last 36 years and this enables me to get a full state pension when I reach pensionable age.
how can you opt out of serps. What's the difference if any between serps and NI contributions.

 

[Mattyboy]

Bit I don't understand is that I have paid into a company pension for the last 36 years. Which has enabled me to retire.
However I have paid NI contributions for the last 36 years and this enables me to get a full state pension when I reach pensionable age.
how can you opt out of serps. What's the difference if any between serps and NI contributions.

Tash, you may have been contracted out as a condition of your company pension membership. Was it final salary. Is there reference to a Guaranteed Minimum Pension (GMP). If yes, you were contracted out and paid slightly less NI as a result.

Forgetting that for a mo, the NI you pay forms the (current) basis for your state pensions. Basic state pension is calculated on the number of years you pay NI. SERPs is calculated on the amount of NI you pay (your earnings). Contracting out is simply swapping accrurals of a SERPS pension paid by the state, for contributions from the government into a pension arrangement in your own name. You do not actually make SERPs contributions. They are inculded in the NI we all pay (if contracted in).

The bottom line is that it makes the subject of shafts like childsplay! They continually change the basis of calcuation for the SERPs part as less people are working (and funding todays state pensions) and more people are living longer.

 

[delc]

Once upon a time, if you worked for a big company with a final salary pension scheme, pensions were quite easy. You paid somewhere between 4 and 6 % of your salary into the pension scheme (tax deductible) and your pension would either be 1/60 of your final salary for every year worked, or 1/80th with a big lump sum that you could invest to get further income. Unfortunately Gordon Brown, when Chancellor of the Exchequer, made a big tax grab from these pension schemes which made them unaffordable (one of his first big Stealth Taxes that we were not supposed to notice), which is why we have all the confusing options we have now. I'm not sure if any of them will give you a comfortable retirement income!

P.S. If you were in company pension scheme, you were generally contracted out of the SERPS state pension scheme, but you still qualified for the basic State Pension, based on NI contributions at a lower rate.

P.P.S. I note that the Tories have never reversed Gordon Brown's tax grab from pension funds (called Advance Corporation Taxes btw).

 

[Tashyboy]

Delc and Matty, many thanks.

like I have mentioned I paid into NI contributions for 36 yrs, I asked for and received a statement showing I had paid over the 35 minimum contributions to get a full state pension when reaching a pensionable age.
As with all things in my life it is complicated when you talk about pensions ie
79-94 MPS pension. Claiming reduced pension now.
94-09IWMPS staff pension which went into PPF fund when company went bust.
( I can get this pension at 55)
09-14 IWMPS. Claiming reduced pension now.
14-15 pension in PPF fund will claim next year.
2023 Notts miners pension £17.20 per week.
2028 state pension.
Bits and bobs all over the place. It would be considerably more if the governments were not taking billions out of our MPS fund.

 

[CheltenhamHacker]

Once upon a time, if you worked for a big company with a final salary pension scheme, pensions were quite easy. You paid somewhere between 4 and 6 % of your salary into the pension scheme (tax deductible) and your pension would either be 1/60 of your final salary for every year worked, or 1/80th with a big lump sum that you could invest to get further income. Unfortunately Gordon Brown, when Chancellor of the Exchequer, made a big tax grab from these pension schemes which made them unaffordable (one of his first big Stealth Taxes that we were not supposed to notice), which is why we have all the confusing options we have now. I'm not sure if any of them will give you a comfortable retirement income!

P.S. If you were in company pension scheme, you were generally contracted out of the SERPS state pension scheme, but you still qualified for the basic State Pension, based on NI contributions at a lower rate.

P.P.S. I note that the Tories have never reversed Gordon Brown's tax grab from pension funds (called Advance Corporation Taxes btw).

Oh Del.

You know why the final salary pension doesn't work anymore?

People live longer. Whilst GB may have had an impact, the change in living situations had a much bigger one, such that the pension schemes could not continue to be run, paying people out so much, for so long.

If someone has worked for 40 years, how long do you think paying 2/3rds of their annual salary each year will last...

 

[delc]

Oh Del.

You know why the final salary pension doesn't work anymore?

People live longer. Whilst GB may have had an impact, the change in living situations had a much bigger one, such that the pension schemes could not continue to be run, paying people out so much, for so long.

If someone has worked for 40 years, how long do you think paying 2/3rds of their annual salary each year will last...

In the late &0's many pension funds had huge surpluses. The then Tory Government allowed companies to take 'pension contribution holidays' to reduce these, and also presumably so that they made more profit and paid more corporation tax. Unfortunate these pension contribution holidays did not apply to their employees! Then Gordon Brown came along and that was that! 2/3 of final salary + state pension was enough to give most pensioners a decent standard of living, which I doubt will apply to today's employees!

P.S. My inflation linked final salary pensions are still paying out so far (touch wood!).