'contract out' pension choice

[ACE2M]

what does it mean and should you do it?

[EvilPie]

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/contracting-out-of-serpss2p

Covers pretty much everything.

[roscopiko]

Basically you've almost certainly got a non decision here once its abolished in April 2012.

[outragous76]

i keeping reading the main screen as "contract out penis........"

[Doobs]

what does it mean and should you do it?

what exactly is your choice?  Do you have a contracted out pension already?

If I was to take a stab, there is a good chance that contracting out is better than not contracting out right now.  The government is consulting on a simpler pension in future http://www.dwp.gov.uk/consultations/2011/state-pension-21st-century.shtml.  If this goes through, if you contract back in you could get nothing in return. 

As roscopiko states the option is about to disappear anyway, so any differerence will be short lived

[ACE2M]

what does it mean and should you do it?

what exactly is your choice?  Do you have a contracted out pension already?

If I was to take a stab, there is a good chance that contracting out is better than not contracting out right now.  The government is consulting on a simpler pension in future http://www.dwp.gov.uk/consultations/2011/state-pension-21st-century.shtml.  If this goes through, if you contract back in you could get nothing in return.  

As roscopiko states the option is about to disappear anyway, so any differerence will be short lived

just starting and offered the option.

cheers for the replies.

[thediceman]

what does it mean and should you do it?

It's been a longtime since I worked as a financial consultant so not sure what changes have happened with regards to pensions.

Is your company got it's own pension scheme , if it has it may be offering you the option to join it or "opt out" and make your own pensions arrangements. The next question is it a final salary scheme or is it money purchase scheme. The old rule was if it's a final salary scheme you are better joining that scheme, infact advisors could not advise against joining a final salary scheme and would be fined if they did. This may have however changed as fewer final salary schemes exist these days.

Alternatively "contract out" my just refer to what use to be called SERPS and is a nominal amount of NI contributions that you can either invest yourself or goes towards your state pension.

Need much more info before stating "contract out or in" and advise seeking advise from a professional consultant. Another factor is do you see yourself staying with this company longterm .

[ACE2M]

what does it mean and should you do it?

It's been a longtime since I worked as a financial consultant so not sure what changes have happened with regards to pensions.

Is your company got it's own pension scheme , if it has it may be offering you the option to join it or "opt out" and make your own pensions arrangements. The next question is it a final salary scheme or is it money purchase scheme. The old rule was if it's a final salary scheme you are better joining that scheme, infact advisors could not advise against joining a final salary scheme and would be fined if they did. This may have however changed as fewer final salary schemes exist these days.

Alternatively "contract out" my just refer to what use to be called SERPS and is a nominal amount of NI contributions that you can either invest yourself or goes towards your state pension.

Need much more info before stating "contract out or in" and advise seeking advise from a professional consultant. Another factor is do you see yourself staying with this company longterm .

cheers, i need to do some more asking by the sounds of it.

[thediceman]

Feel free to contact me if you need any further advice once you get more info but as I stated it's been a while since I worked in this industry.

[Geo the Sarge]

I take it you have just started new employment?

Few, if any companies still have a Final Salary Scheme available to new employees. As Diceman said if that option was still available it is the better option.

I think your option to "contract out" will be more an opt out of an employee contiribution to your company scheme.

In the pension industry "contracting out" usually relates to choosing to have your NI contribution percentage normally allocated to provide the second state pension(S2P formerly known as SERPS) on at retirement age to be reinvested into a private or employers pension scheme. As from April this year contracting out of S2P is no longer an option so doubt that this is what you are being asked.

I am a trainer/mentor in pension administration, happy if you PM or email details and I'll have a look for you.

Geo

[OverTheBorder]

As mentioned above its unlikely you will have a choice post April 2012, if you are contracted out through a company final salary arrangement it wont be a choice, its either accept it or opt out.  Unless the Scheme is utter pants it would be highly highly unlikely that is the best option.

The S2P Scheme is a Career Average Revalued Earnings style scheme with age related structure and historically where a choice did occur it was better to be Contracted Out younger and then Contract In as you got older 50+ as it was less value for money.