Hi all and can someone point me in the right direction.

Versysrider · March 3, 2014

Hi to everyone on the CAG forum.

I have been a "lurker" for quite a while and was recently asked for help by a good friend who is totally computer illiterate.

She works as a nurse looking after handicapped children and has done so for all her working life.

Way back she was persuaded by the NHS to "opt out" of her pension scheme.

After 13 years out of the NHS scheme she was warned that her pension had sufferred and advised to opt back in.

This she did, but on recently checking her pension forecasts, she finds her pension is a shadow of what it would have been if she had stayed in.

Is there any pension advice or anyone who can help on the forum please. If so it would be much appreciated.

All the best

Ian

honeybee13 · March 3, 2014

Hello there.

Just to check, you're saying that the NHS persuaded your friend to opt out of their own [normally generous] pension scheme?

This may not have been good advice and I'm quite surprised that the NHS would say this. Can your friend prove what happened please?

HB

Versysrider · March 3, 2014

My friend started to receive leaflets from a firm called Childs and Co,

who were promoting opting out of the NHS scheme and going into a private pension.

I was amazed, when she told me that many members of staff had leaflets put in their wage packets by the payroll dept.

She is now devastated that what she thought would be a decent pension is going to be pathetic.

Also she should have been upgraded to "mental health nurse status" or sum such on her pension, but only after 10 unbroken years.

The opting out negated this option and even after opting back in,

she could not then take advantage of the benefits this enhanced status gave.

I am very upset for her, as she does a sterling job and is real gutted!.

Thanks for the quick reply.

Ian

honeybee13 · March 3, 2014

Thank you for the information. So the problem was created by Childs and Co from what you're saying. Are they still in business?

I'll move your thread to the Pensions and Insurance forum, which has seen similar problems in the past.

HB

Versysrider · March 3, 2014

Many thanks, could you post a link, as I couldn't find the Pensions and Insurance forum.

Many Thanks

Ian

honeybee13 · March 3, 2014

I think a good place to start would be the Pensions Advisory Service, TPAS. They're independent and are the stage before the Pensions Ombudsman if that turns out to be the right way to go.

Here's a link to their website, there's a helpline too.

http://www.pensionsadvisoryservice.org.uk/

HB

Versysrider · March 3, 2014

Thankyou very much.

Ian

**unclebulgaria67** · March 3, 2014

My friend started to receive leaflets from a firm called Childs and Co, who were promoting opting out of the NHS scheme and going into a private pension. I was amazed, when she told me that many members of staff had leaflets put in their wage packets by the payroll dept. She is now devastated that what she thought would be a decent pension is going to be pathetic. Also she should have been upgraded to "mental health nurse status" or sum such on her pension, but only after 10 unbroken years. The opting out negated this option and even after opting back in, she could not then take advantage of the benefits this enhanced status gave. I am very upset for her, as she does a sterling job and is real gutted!.

Thanks for the quick reply.

Ian

In addition to contacting the Pension Advisory Service, I think your friend should also contact their HR department about why the NHS allowed a private pension providers leaflet to be issued with wage packets.

There is more to this I would think, which needs to be explained. I cannot see any NHS department being involved in providing their staff with information about opting out of the NHS pension scheme and transfering into a private pension. That would not make any sense at all.

Versysrider · March 3, 2014

Thanks UncleBulgaria, it seemed weird to me as well, but my friend reckons it was in approx 1989.

She had been in the NHS scheme since she started in 1984 and the payroll dept started putting info leaflets about private pensions in with their wage slips.

I said that this sounded very dodgy, but she assures me that it was happening.

I know back around the same time I was advised to contract out of serps and take a private pension, a decision which has and will also cost me dear.

Thanks for your help and advice though.

I cannot find Childs and Co, apart from a private bank which is a subsidiary of RBS.

However i have been talking to my friend earlier and she thinks she has a big folder of all her old wage slips and pension stuff.

So I am going to go on a mission to go through it all and see what we can find.

Thanks

Ian

**dx100uk** · March 4, 2014

I seem to remember the same around about that time.

it happened to most people on the superannuation scheme

I think there was a wisdom at that time made that they had to 'advertise' alternatives schemes by compulsion.

dx

**dx100uk** · March 4, 2014

nicked from elsewhere:

State Earnings Related Pension Scheme.

SERPS Opted Out History

SERPS: Contracting Out – For Better or Worse?

Introduction

SERPS is the state Earnings related Pension Scheme (Now known as the State Second Pension) and is essentially a second pension available on top of the standard basic state pension. SERPS is comprised of National Insurance contributions paid by employers and employees to the Government which in turn pays an enhanced second pension. Since National Insurance contributions increase with earnings, higher earners receive a larger second pension (up To a point).

From 1988 onwards it became possible to "contract out" of SERPS – this meant that some of the National Insurance contributions were redirected from the state pension into personal pensions. Where people contracted out of SERPS the Government was no longer responsible for paying the second pension and this responsibility passed to the personal pension provider.

The idea was that the personal pension provider would invest the national Insurance contributions in such a way that the investor would be left with a larger pension at retirement than would have been the case under SERPS. Contracting out was very popular throughout the late 1980’s and early 1990’s.It is estimated that some 7.5 million people have contracted out of SERPS at some point and half of these remain contracted out.

The problem

It is now apparent that millions of people who contracted out in the 1980’s and1990’s are set to be worse off in retirement than they would have been with their second state pension. Put simply, the national insurance contributions invested by personal pension providers have not grown anything like the degree that was anticipated in the 1980’s and 1990’s. Accordingly the pension that people who contracted out will receive will often be significantly less than they would have received under SERPS.

Mis selling

People who have contracted out of SERPS will want to know whether they have any remedy to recoup the losses they may suffer in later life. In order to recover losses a person will need to show that the advice he or she received in relation to contracting out amounted to a "mis-sale". There is evidence that in the 1980’s and early 1990’s financial advisors were recommending almost as a matter of course that people would benefit from contracting out of SERPS. In part this was, no doubt, because the advisors received a commission for each person who agreed to contract out. In addition, however, there was a general perception, encouraged by the Government and media that contracting out was a "good thing". One newspaper even went as far as stating that for many people contracting out could be "the best financial planning decision of their lives". It is perhaps not surprising, therefore, that financial advisors were caught up in the contracting out furore.

Notwithstanding the above, any financial advisor recommending contracting out was obliged to investigate fully whether or not contracting out was appropriate to the individual investor. This means that in each case an advisor should have investigated the investor’s age, sex, employment status, earnings, details of any employer’s pension scheme and attitude to risk. Where this was not done, the investment will have been miss-sold.

Compensation Claims

It is estimated that millions of people will lose out as a result of contracting out of SERPS. If the contracting out is as a result of a "mis-sale" then the investor may well be entitled to compensation. Calculating compensation losses is complex where the investor in question has not yet retired. It involves a comparison of the projected return the contracted out contributions will give at retirement with what the second state pension would have given. Even at projected future growth rates of 7% per year (which may be optimistic) many people who have contracted out will suffer significant losses.

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