Hi,
I have recently received a leaflet from the FSA about S2P. One paragraph stands out in which is says "Independent analysis that have been done for us suggests that most consumers are likely to be financially worse off by contacting out or staying contracted out during 2006/7."
I have never heard any specific advise on whether to contract in or out. Does anyone know the reasons for this statement? Who are these "independent analysists"?
M
I asked last year when they sent the notice and they told me to see an IFA.
Needless to say, I am remaining contracted out until they give me the curtesy of a reply.
Daytona
Eh? Aren't you the one to suffer?
FWIW, I agree with the FSA's pundits. There may be a few people for whom it makes sense to contract out, but not that many.
I'm glad to hear that you can be that positive. Would you give anyone precise advice on this topic?
Rob Graham
Not any more, as I'm no longer authorised.
Virtually none. But it will start to become flat rate (accruals that is, benefits earned so far will continue to grow in line with earnings AIUI).
What's to stop them changing rules re private/company pensions? This government's actions have done far more harm to private pensions than to state pensions.
Anyway soon you won't have the option to contract out unless you are in a company defined benefit scheme.
That is the long term plan - the white paper says accruals will gradually start to become flat rate and they estimate by 2030 will be totally flat rate. But AIUI S2P credits earned before then should increase in line with earnings as now.
You won't get the choice. Contracting out will soon be abolished except for DB schemes (eg company final salary schemes).
I thought it was contracting IN that would be abolished :-)
People who currently have always been contracted out may benefit from contracting back in for one year I believe.
Nope - unless you're in a DB scheme you'll be contracted in automatically.
They'll probably also reduce the rebates for DB schemes which may cause more of them to close...
Where did you hear that?? Because it's complete bullshit.
By "flat rate" they don't mean that someone getting S2P credits for 1 year will get the same as someone getting S2P credits for 49 years. They mean a year in which you earn 100,000 gets you the same as a year in which you earn 6,000.
You will still get S2P in proportion to the number of years you get credits. This is the argument the government used against having a "citizen's pension". See p.22 para
16 of the white paper response document for an example.
No. Because there is no definitive answer here. Would you like a blue or a green car, sir? Would you want advice from me on that, sir?
Maybe, maybe not. Ae you saying that advisers who advise on this have extra PI costs?
There's no right or wrong. One route or the other will turn out to be less advantageous, but try working that out in advance with shifting goalposts.
Rob Graham
If there's no definitive answer, then it's a bl**dy stupid question!
Donno - I'd guess that if you could find one who /would/ give you a definitive answer, then they'd have pretty hefty PI.
I don't disagree with that, but it's somewhat disingenuous of the FSA, providers and IFAs to say anything other than "We sorry, we don't have a clue".
The implication that it may be better or worse to contract out *without* the provision of any method for one to work it out and decide for oneself is the problem.
When the FSA say "most consumers", i'd gues most folks want to kno if that includes them.
(I know it's theoretically possible, if you have a full list of all the salary you've ever been paid *and* all NI you've ever paid *and* the dates, *and* are prepared to make estimates of future salary, but....)
rgds, Alan
Not a bit of it. The question is fine. It's knowing how to answer it that's the problem. There are many subsidiary questions that are raised by the first one. What's the government going to do about S2P in the future, what are fund growth rates going to be, what re the risks in either course of action, do you want to retire before the state retirement age, do you want the 25% of your pension fund as cash, are you married, do you want to leave money to your dependants if you die, etc. answer these and you may be getting near an answer.
I doubt that.
Who IS saying that "we DO have a clue?" The FSA ain't saying nuthin'. (Don't believe me? Ring them up and ask for specific advice). I doubt you'd get a positive answer from most IFAs either because there is no proper answer.
Then ring the FSA up and ask them.
No, this won't be enough information.
Rob Graham
Start from the base of assume that existing legislation remains.
assume the latest review passes into law
long run averages a period matching the customers life expectancy
If it can be worked out, you might as well give the range of options
"Independent analysis that has been done for us suggests that most consumers are likely to be financially worse off by contracting out or staying contracted out during 2006/07."
I refer you to my earlier post.
They've made a statement without providing the evidence, even when it's requested. If there's one thing that generations of financial service industry customers will have learnt, it's not to trust what they're told until they've seen the evidence.
Daytona
"Daytona" wrote
Unfortunately, you can know something about "most people" which you cannot determine exactly for a particular person. For example, we can know that "most people currently aged
65 will die within the next 25 years". But will Fred Smith, currently aged 65, die before in the next 25 years or not? :-(So, knowing that "most consumers are likely to be financially worse off" does *not* mean that you can determine whether a *specific* person will be worse off or not...
At 12:52:28 on 03/02/2007, Tim delighted uk.finance by announcing:
We can claim to know that, and we can then watch all the pension funds disappear down the pan when those people refuse to lie down and die on time.
"Alex" wrote
What do you think is the likelihood of that? [Ie, the likelihood of *most* people now aged 65 still being alive at age 90?]
At 14:09:16 on 03/02/2007, Tim delighted uk.finance by announcing:
I wouldn't even like to speculate what medical advances will be made in that period.
Unless he's dead already, no of course he won't.
"In the next 25 years" means within the interval from now to
25 years from now. So "before in the next 25 years" can only mean before that interval, i.e. before now. :-)
"Ronald Raygun" wrote
Did I really write that? Dear me... But I'm sure you do know what I meant!
Maybe this is an indication that the government will properly support S2P for the foreseeable future?
BTW: A colleage of mine has consulted our Company IFA and they won't give advice on whether to contract in or out.
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