The State provides two types of pension,
one being the Old Age Pension and the other an earnings related
pension known as S2P (replacing SERPS) which are paid for out
of your employed National Insurance contributions.
You have probably seen comment about the subject of Contracting
Out appearing in the media in the last few weeks. As your Financial
Advisers we would like to give you our opinion so that at least
you can give the matter some further thought.
Argyle believe that we cannot give you definitive advice on
whether to Contract Out or to Opt back in to S2P, because there
are too many factors that could change in the future. Pensions
have become a major political issue, although no obvious solutions
to the so called Pensions Crisis are being put forward by any
political party.
Contrary to popular belief there is no State Pension Fund
of any kind. Today's State pensions are paid out of today's
Income Tax and National Insurance. Your contributions are not
put aside and earmarked for you personally, but simply contribute
to the general costs of running the country.
You may decide that you believe that the State will always
provide an appropriate pension in exchange for your contributions,
or you may feel better knowing that having opted out of S2P,
you have the comfort of the contributions being in your own
personal pension. Assumptions have to be made for either decision,
about future interest rates, inflation rates and the potential
growth of your personal pension fund.
Pensions and the Regulatory changes which come in April 2006
affect all of our clients. It is our intention to cover these
changes very fully from January 2005. State pensions will no
doubt form a part of any discussions we have with you. In the
meantime although we cannot give you a definitive answer to
the question, we will be happy to discuss your involvement
with the State pension arrangements, as part of an overall
review of your pension arrangements.
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