Click here to go back to the SERPS Main pageContracting out of the State Earnings Related Pension Scheme is a major decision that could reduce your retirement income.
Here is a list of questions frequently asked by people in your situation. If you have a question about SERPS which isn't on this list, please feel free to contact BIFA for advice.
| Q | What have I done by contracting out of the State Earnings Related Pension Scheme (SERPS)? |
| A | You have given up a guaranteed pension income, based on your lifetime PAYE earnings. |
| Q | What is SERPS then? |
| A | It is a pension income paid in addition to the Old Age Pension funded by National Insurance contributions that you have paid if you are or have been employed. |
| Q | Have I lost this pension benefit? |
| A | No. You have lost a guaranteed income for each year that you have been contracted out. The income should be replaced by an annuity from a Personal Pension Plan. |
| Q | So what do I stand to gain? |
| A | Hopefully a bigger income when you retire. |
| Q | Where does this income come from? |
| A | When you contracted out you asked the DSS, now the Contributions Agency, to put a lump sum of money into a Personal Pension Plan each year, paid from your NI contributions. |
| Q | How safe is this income from a Personal Pension Plan? |
| A | It is not guaranteed. The income is dependent on many unknown factors, hence the risks involved. It depends on the amount of money sent by the Contributions Agency, the time they sent it, the returns made on the investment, the charges applied to your plan, inflation, interest rates, annuity rates and many more. |
| Q | Have I made a mistake? |
| A | Not necessarily, over a period of time, if your money obtains the required growth and the charges are reasonable you may well be better off. |
| Q | I don't know what I've done, what do I do? |
| A | Contact BIFA and apply for a SERPS review! |