SERPS (State Earnings Related Pension Scheme) mis-selling

In 1988, the Government allowed individuals, for the first time, to leave SERPS (known as ‘contracting-out’) and have part of their National Insurance Contributions paid into a personal pension plan instead.

More than 5 million people were contracted-out of SERPS in this way at some stage during their working lives.

It is now estimated by independent analysts that up to 4 million of these personal pension plans will provide much lower benefits than would have been payable from SERPS. 

This is due to a combination of factors: poor investment performance, high policy charges, and Government reductions in the premiums they pay to personal plans.

It is doubtful anyone who was advised to contract-out was warned of the risks. On the contrary, contracting-out was presented almost as a no-lose proposition: you didn’t have to pay a penny extra for it and you would be much better off in retirement as a result. 

Where you mis-sold?

The first step in the process is to find out whether you are a victim of mis-selling. As a general rule, if at the time of advice you were aged over 40 (women) or 45 (men) then you have almost certainly lost out from contracting-out. In contrast, if you were younger than this age range, the advice would have been considered reasonable at the time and you probably don’t have a mis-selling claim.

Alternatively, if your salary at the time you were contracted-out was under £10,000 per annum, again you have probably lost out from contracting-out.

Unfortunately, you cannot transfer your personal pension fund back into SERPS. But you can pursue the firm that advised you to contract-out for compensation so that you do not lose out at retirement.

Contact Greg now if, at the time of advice, you were either (1) over the age stated above; and/or (2) you had a salary below £10,000 per annum.