Advisability of opting out of S2P

This issue is a matter for a detailed discussion as individual views must be taken into account.

The Government Actuary, however, has made certain assumptions in determining the rates of rebate. These are calculated to produce equivalent benefits through a private pension arrangement that would largely match the state benefits.

The actual result may be more or less than the amount payable under S2P. The difference will depend on the performance of the investments in which the N.I.Rebates are invested (in your pension plan), and interest rates at retirement.

1. the mathematical implications and viability of investing the N.I.Rebates and eventual pension achieved, when opting out of S2P and,
2. your own view on the likelihood of future Governments being able to maintain S2P benefits at the current level.

This is a complex issue and in August 2004 the Association of Independent Financial Advisers (AIFA) issued a leaflet jointly with the Association of British Insurers (ABI) warning of the uncertainty of future results when opting out of S2P.

Various Insurance companies have since gone further to recommend their policy holders opt back into S2P now because they believe there is sufficient doubt as to whether the N.I.Rebates are adequate to provide a private pension at least equivalent to what would have been achieved by staying in S2P.

The latest proposals from the Government are likely to end individual "opting out of S2P" by about 2012  so the decision will be made for us.

Please have a look at the section  "New Legislation".