From 6 April 2012 the Government will remove the option to contract out of the State Second Pension (S2P, formally known as SERPS). This change will affect everyone who is currently contracted out into non-final salary pensions (commonly known as money purchase pensions).
Over the years many people have elected to contract out. If you are employed and have a personal pension there is a good chance you may also have been contracted out of the S2P at some point.
What is the effect of this change?
- Anyone contracted out of the S2P into a money purchase pension on 6 April 2012 will be automatically contracted back in.
- The limitations on how money in your pension pot which came from being contracted out of the S2P will be relaxed.
What does this mean in practical terms?
The amount of money being paid into your pension will decrease, if you were contracted out, unless you take some action.
These changes are serious and to ensure your pension is still adequate for your needs it is imperative you review your pension planning.
Contact us to find out how we can help you through these changes.