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Guest tenant super

Contracting Out Of State Second Pension

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Guest tenant super

Just a couple of point of interest to anyone paying NI in the uk who is accruing benefits in the State Second Pension.

If you contract out you will now on retirement be able to take 25% of your fund as cash including the protected rights element that previously had to be taken as an annuity. However if you retain benefits in the State Second Pension (S2P) this must be taken as an annuity!

The decision to contract out or remain contracted out is quite difficult now but this has swung it for me. The other advantage is that you are one step removed from the DSS and the whims of the government. The disadvantage is that you may of course end up with a lower pension but this is an investment forum right so if we choose the right funds we'll be laughing.

Thought I'd tip you the wink on this one regards all.

TS.

Edited by tenant super

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I have heard the arguements about removing Government control before, but I'm not so sure.

Contracted Out benefits as you have alluded to were already prone to different treatment in a personal arrangement. Who's to say the rules won't change again in the future?

NDL

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Guest tenant super

I have heard the arguements about removing Government control before, but I'm not so sure.

Contracted Out benefits as you have alluded to were already prone to different treatment in a personal arrangement. Who's to say the rules won't change again in the future?

NDL

A very good point!

Only PP's taken out before July 1990 (Pre Royal Assent of ICTA 88) meant that the protected rights element could be taken as cash.

There is little doubt that the recent Turner Report will result in further changes to pensions legislation in the next government (perhaps this one if it is sure of itself) In fact it is widely known in the industry that as frequently as every 8 years or so pension rules are significantly reviewed so as sure as eggs is eggs there will indeed be changes.

I sense however that future amendments will make it more appealing to contract out so as to keep a lid on the states already heavy burden of pension commitments. Furthermore, a central tenet of simplification are the rules relating to cash (25% of the fund/equivalent) - it'd be a pretty ballsy chancellor to repeal that now that it's in the statute book.

TS

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[Another factor to bear in mind, with the 2nd state pension benefits cannot be taken until state pension age. From April 06 you will be able to take the benefits from a contracted out personal pension from 50 (goes up to 55 in 2010. Generally it isn't a good idea to purchase an annuity at such low ages but from April you will be able to go into drawdown, take 25% cash and a nil income until such a time as you choose to take an income in drawdown or want to purchase an annuity.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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