Pensions: have you lost out by opting in?

by Paul Northmore, Managing Director, Manning and Company Independent Financial Advisers

Once again, current news has provided an example of why it is so vital to take control of your financial future.

Anyone with a personal pension in the last 20 years will have encountered the issue of ‘Contracting Out, or In’.  Perhaps you joined a company scheme in the early 90’s which advised you to “opt out of SERPS” – allowing you to build your own pension pot, but opt for a lower state pension. 

Then, in the mid 2000s, the tide changed.  Following some high-profile consumer reports, millions were advised by their pension providers to opt back in – and some providers went as far as opting clients back in automatically, unless told otherwise.
As we advised our clients at the time, handing control of your financial future back to the government is never without its risks.
Another ten years on, and the government has recently proposed plans to cap the state pension at £144 per week for those who are opted in (effective not before April 2017).  However, those who remained opted out will be able to keep their own private pension, yet still accrue extra credits to build their state pension up to the same £144 level. 
So, once again the goal posts move; and – at the moment, under this proposal – those who remained opted out will be better off.  Some experts estimate that those who opted back in could have lost as much as £1000 per year in contracted-out rebates.
You have to ask yourself three questions.  Does the government have your personal best interests at heart?  Can you ever rely solely on the government to take care of you?  And can you predict what a future government might do? 
Taking control is more important than ever.  If you’re concerned about your present or future finances, contact Manning andCompany today.

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