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Morningside

Original Poster:

18,604 posts

112 months

[news] 
Saturday 21st April 2012 quote quote all
OK. I am thick when it comes to these sort of things and any reply may/will appear dumb.

Many, many years ago (1989 in fact) I was 'pestered' into opting out of SERPS by Sun Life of Canada.

Now, according to the yearly statement after they tracked me down! I have:


Units Held Unit Price Value of Units
Universal Managed Fund 1,931,256 £4.9520 £9,563.58

Giving £520 a year from dd mmm 2029.



So what happens?
Does this mean I will lose my state pension?
Do I still get the same and this will top it up?
Can I claim it all back?
Can I cash in early?

Sorry for dumb questions.



groak

3,254 posts

62 months

[news] 
Saturday 21st April 2012 quote quote all
Morningside said:
OK. I am thick when it comes to these sort of things and any reply may/will appear dumb.

Many, many years ago (1989 in fact) I was 'pestered' into opting out of SERPS by Sun Life of Canada.

Now, according to the yearly statement after they tracked me down! I have:


Units Held Unit Price Value of Units
Universal Managed Fund 1,931,256 £4.9520 £9,563.58

Giving £520 a year from dd mmm 2029.



So what happens?
Does this mean I will lose my state pension?
Do I still get the same and this will top it up?
Can I claim it all back?
Can I cash in early?

Sorry for dumb questions.
Nope you're not dumb. But you were pestered by a conman who was only thinking of his commission into signing up for something neither he, nor you understood anymore then than you (or he) do now.

It appears that you might, one day in 2029, be entitled to a tenner a week from this fabulous life-changing investment. Terrific, eh? Especially as by then it probably won't be enough to buy a litre of petrol.

It definitely doesn't affect your state pension entitlement. The only question you might want to answer is whether or not you might have been better off NOT 'contracting-out' (or 'con-tricking out' as it's probably better described). The answer to that one is 'probably'. So IMHO you're probably, like me, in some small way a victim of the conman industry known as 'pension-planning'.



fandango_c

1,121 posts

69 months

[news] 
Saturday 21st April 2012 quote quote all
Ignore Groak, he has issues regarding pensions and lacks knowledge about them.

Hopefully someone who knows what they're talking about will reply.

By contracting out of SERPS, you will have reduced your SERPS (I thinks it's called the state second pension now) pension, but get the pension fund with Sun Life instead. You may or may not be better off than if you hadn't contracted out.

Your basic state pension won't be affected.

groak

3,254 posts

62 months

[news] 
Saturday 21st April 2012 quote quote all
fandango_c said:
Ignore Groak, he has issues regarding pensions and lacks knowledge about them.

Hopefully someone who knows what they're talking about will reply.

By contracting out of SERPS, you will have reduced your SERPS (I thinks it's called the state second pension now) pension, but get the pension fund with Sun Life instead. You may or may not be better off than if you hadn't contracted out.

Your basic state pension won't be affected.
I see pensions very much like venereal disease is to sex. They're something you're at risk of catching/getting caught up in when financially planning retirement. Of course, lots of people DO catch VDs. Mostly they can be got rid of without affecting you further. But in some cases they're with you for life.

In YOUR case, you have been infected with a virus. A parasitic lifeform known as 'Sun Life of Canada' now lives within what used to be your State Earnings Related Pension Scheme. For sure it will suck blood from it to ensure its survival. But there may be some certain symbiotic affect - in your case apparently amounting to a tenner a week after FORTY YEARS of involvement with their professional investment talents. How impressed you are with that depends on how high or low your standards are. Of one thing you can be assured. If it's not gone well, it was your 'fault' you got into it. You 'tucked yourself up' as the 'professionals' in the 'industry' apparently term it.

Almost certainly you would have been better off staying in SERPS (now SSP). And the conman who haunted you to do it probably got about £75 commission from the deal, if you're interested. I bet you've never heard from him again.

Morningside

Original Poster:

18,604 posts

112 months

[news] 
Saturday 21st April 2012 quote quote all
This sounds a nightmare. So if my normal state pension wont get effected I suppose I will have to declare this as extra income and lose it?
I have not paid anything into this for years so does that mean they have been 'suckling' it away without my knowing (if you see what I mean).

And what the hell was the point of it in the first place? The 9k mentioned will be subject to admin fees and I will end up with sod all and where did this units come from?

Does anyone know where they policies have actually matured? If so, what did they actually get back?

I suspect all this cash and pension stuff was done in the heyday of financial boom.


And no, I have never heard from the chap again. wavey Hello John. Then again, to be fair I moved 100 miles away.
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fandango_c

1,121 posts

69 months

[news] 
Saturday 21st April 2012 quote quote all
Morningside said:
This sounds a nightmare. So if my normal state pension wont get effected I suppose I will have to declare this as extra income and lose it?
I have not paid anything into this for years so does that mean they have been 'suckling' it away without my knowing (if you see what I mean).
You will have never paid any money into this directly. Some of the NI that you have paid will have gone to Sun Life instead of the government, so they have been "suckling" it away, but you should have been aware that they were doing so.

Morningside said:
And what the hell was the point of it in the first place? The 9k mentioned will be subject to admin fees and I will end up with sod all and where did this units come from?
The idea is that the NI contributions invested perform well and produce a better pension than what SERPS would.
Sun Life would get income from fees on your invested pension fund and your "friend" John would get some commission.


TFP

87 posts

98 months

[news] 
Saturday 21st April 2012 quote quote all
groak said:
I see pensions very much like venereal disease is to sex.
I think you're confused about which of these topics you're an expert on.

fandango_c

1,121 posts

69 months

[news] 
Saturday 21st April 2012 quote quote all
TFP said:
groak said:
I see pensions very much like venereal disease is to sex.
I think you're confused about which of these topics you're an expert on.
rofl

sidicks

5,331 posts

104 months

[news] 
Saturday 21st April 2012 quote quote all
TFP said:
I think you're confused about which of these topics you're an expert on.
laugh

groak

3,254 posts

62 months

[news] 
Saturday 21st April 2012 quote quote all
Well now, why pester me? Why not convince the poor bloke who was coerced into earning a commission for a conman that he was wise to contract-out just so that he could earn a parasite life company money for turning his serps fund into a colossal tenner a week payday after FORTY YEARS of handling his fund!

Go on. Tell the guy. The whole thing was a con to get a commission, wasn't it? Oh but it's all different nowadays, isn't it! Yeah yeah yeah.


Morningside

Original Poster:

18,604 posts

112 months

[news] 
Saturday 21st April 2012 quote quote all
Going by the feedback here im not feeling to great about this frown

sidicks

5,331 posts

104 months

[news] 
Saturday 21st April 2012 quote quote all
Morningside said:
Going by the feedback here im not feeling to great about this frown
The feedback from those that understand what they are talking about or from others.

In summary:

By contracting out you gave up part of your guaranteed state pension in exchange for lower national insurance contributions which were invested in a fund. The gamble you took was that the investments perform sufficiently strongly to allow you to purchase a higher pension with this pot compared to the state pension given up. There were no guarantees.

At the time when this was done, whether this was worthwhile depending on your age and the assumption about future investment returns, interest rates and longevity.

Over the period, interest rates have fallen, hence investment returns have also fallen. At the same time longevity has increased further increasing the cost of the pension.

(Of course falling interest rates may have helped you in other ways).

The current pension statement you have received provides an indication of what you might receive at retirement. You might actually receive more or less depending on the factors mentioned above.

By investing in higher risk assets you might expect to achieve a higher return and hence higher pension on average, but higher risk assets can also have bad periods in which they lose money.

If you take the risk, you have to face the consequences...

The salesman may or may not have explained this to you at the time. Chances are they may not fully have understood the implications of what they were selling, as typically these salesman were always very clued up.

By the way, groak is an ex-salesman....

smile
Sidicks

TwigtheWonderkid

11,280 posts

33 months

[news] 
Monday 23rd April 2012 quote quote all
OP, there is one good thing about having contracted out, and that is that the money accumulated is yours, and in your name, and cannot be taken away from you.

On the other hand, there is absolutely nothing to stop this or any future government saying that state pensions will be means tested in future and you getting absolutely nothing off them.

There is every chance that this will happen before you get to retire. The current state pensions system is not sustainable. I'm 49 and have assumed as a matter of course that when I retire at 67, I will not be entitled to any state pension. Nothing. Nada. Ziltch. Everything I do about retirement now is geared to that strong possibility. If I get anything off them it'll be a bonus.

My view, get as much as you can away from government and into your own name.

stevejh

677 posts

87 months

[news] 
Monday 23rd April 2012 quote quote all
From the value of your fund it looks highly likely that you were only contracted out for a few years. This means that at some point you were contracted back into SERPS (now State Second Pension). This could have happened because you perhaps joined a final salary pension or became self employed or opted back in yourself by completing a form (although if they've only just found you then that seems unlikely).

Most insurance companies have been sending letters out with their annual statements advising people to seek advice as to whether contracting out is still appropriate for them but you wouldn't have seen any letters because they didn't know where you were. Some companies have also taken it upon themselves to contract people back into the S2P as a matter of policy which may be what happened to you.

I certainly wouldn't get too worried about it but you probably won't really know whether it was a good or bad thing until you actually take the pension.

Oh, by the way, when you take the pension you can take up to 25% of your fund value as tax free cash - not an option with the State Pension and you can also take it any age from 55 upwards. Just so you know.


JM

2,133 posts

89 months

[news] 
Monday 23rd April 2012 quote quote all
stevejh said:
Oh, by the way, when you take the pension you can take up to 25% of your fund value as tax free cash - not an option with the State Pension and you can also take it any age from 55 upwards. Just so you know.
Does that still apply if you contract back in?


stevejh

677 posts

87 months

[news] 
Monday 23rd April 2012 quote quote all
Yes. Even if you contract back in you will still have a private pot of SERPS money. The pot isn't transferred back to the State when you contract back in. When you contract back in just the ongoing part of your NI that pays for the State Second Pension will be redirected back to the State rather than into a private pension.

Morningside

Original Poster:

18,604 posts

112 months

[news] 
Monday 23rd April 2012 quote quote all
I did breifly go self employed so maybe that does explain things.

Take it out at age 55 you say scratchchin. Shame no lump sum. Did I also hear some companies were buying them off you for a small fee?

JM

2,133 posts

89 months

[news] 
Monday 23rd April 2012 quote quote all
stevejh said:
Yes. Even if you contract back in you will still have a private pot of SERPS money. The pot isn't transferred back to the State when you contract back in. When you contract back in just the ongoing part of your NI that pays for the State Second Pension will be redirected back to the State rather than into a private pension.
Great, thanks for the reply.


r1chie

21 posts

29 months

[news] 
Monday 23rd April 2012 quote quote all
If you have any other personal or group pension plans I would suggest looking at transferring this plan into them. Sun Life of Canada have quite high charges and this will erode your fund over time if the investment performance isn't great and you are no longer paying in. You will need to seek advice about this first.

stevejh

677 posts

87 months

[news] 
Monday 23rd April 2012 quote quote all
r1chie said:
If you have any other personal or group pension plans I would suggest looking at transferring this plan into them. Sun Life of Canada have quite high charges and this will erode your fund over time if the investment performance isn't great and you are no longer paying in. You will need to seek advice about this first.
Probably a good idea in principle but you'd probably find you'd need to pay a fee to get advice on transferring a pot of that size so you would need to weigh up the pro's and con's to make sure any saving on charges is worth paying a fee for. You'll probably find that Sun Life will have a 1% pa charge on a contracted out fund which you're unlikely to better by transferring. You would need to ask Sun Life what their charges are. If the fund has been performing badly then you may be able to switch at no cost into a better performing Sun Life fund.
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