People often invest in various funds and pension plans to reap good benefits in the future. There are numerous retirement pension schemes in the UK. To choose from the long list and types of schemes can be tricky and confusing enough. One of the most trusted plans is State Earnings Related Pension Scheme (SERPS) which is upgraded as S2P or State Second Pension Plan for lower earning groups. Out of various plans SERPS pension provides a layer of retirement pay on top of the basic pension scheme. This entire plan is related to the earnings over a working life.
People who are self-employed or partners in any firm cannot apply for this plan. Another situation can be if an individual is a member of a company, which provides a final salary pension to all his employees, he cannot apply for SERPS scheme. Whereas, other employees who have no company scheme and just a personal pension plan can successfully apply for SERPS pension plan. If you are a part of this particular plan a sum of national insurance payments is made on your behalf, which then goes into the scheme. It will offer pensions from the contributions based on average earnings within the working life of a pension holder. Individual who have opted-out of the scheme since 1988 have made switches or transfers to private schemes called Appropriate Personal Pensions (APP). Here, in these plans all your contributions are invested in stock markets and their value can fall or rise depending on the market behavior. At the time of retirement the accumulated sum buys an annuity whose value will depend on the date of purchase. Although there are no guarantees of high returns or minimum loses in such retirement schemes.
It is very important to take expert advice before investing or opting out from SERPS pension plans. Any pension holder can take a free pension review or consult a team of Independent Financial Advisors for expert advice. In fact, the insurance company or Independent Financial Advisors, which sold the plan, should be able to help in reviewing better future options. The Financial Services Authority has a fact sheet on "contracting-out of SERPS. One should always take such reviews in regular intervals to find out the best investment options in the market and to evaluate the performance of their current pension plans. Based on the performance they can decide whether to continue with the current scheme or transfer the funds to a better plan giving higher return benefits in the future.
Important information on the SERPS pension scheme