The state earnings related pension scheme (SERPS) was a government pension plan that preceded the State Second Pension. The scheme aimed to provide additional income-related retirement savings on top of the basic state pension. Employees who paid class one national insurance contributions between 1978 – 2002 were enrolled in the SERPS, but this entitlement often conflicted with an individual’s occupational pension scheme – resulting in numerous mis-sold SERPS related pension schemes.
Employers that offered final salary pension schemes between 1988 – 2002 were inclined to contract out their employees from SERPS because it meant they would pay less in national insurance (NI) contributions. An employer initially had to provide a final-salary pension plan with defined benefits to opt employees out of SERPS – a process that seemed like a win-win for employers and employees alike. Employers paid less NI contributions, while employees were guaranteed an earnings-related income upon retirement. However, opting out meant that employees either reduced or stopped their SERPS payments entirely – surrendering an additional retirement income that could have been valued at thousands of pounds.
The process of opting out was later broadened to include pension schemes/investments of different types, providing fewer – if any guaranteed benefits – to employees that elected to contract out of SERPS. Mis-sold SERPS tend to relate to this latter period, in which pension holders received quantifiably less money by joining a private pension.
SERPS was replaced by the State Second Pension in 2002 to improve pensions for lower earning employees – but individuals who opted out of SERPS between the years of 1988 – 2002 still have a SERPS entitlement and may be entitled to compensation.
Am I Entitled to Mis-Sold SERPS Compensation?
Opting out of SERPS started picking up in 1988 when employers were incentivized to provide more for their employees upon retirement. However, this monetary motivation could have laid the foundation for mis-sold SERPS related private pensions. Private pension schemes should be provided to improve the livelihood of individuals after retirement, not to reduce a company’s outgoing costs.
Final-salary pension schemes generally provide good returns for retired individuals, and in many cases contracting out of SERPS to join a private defined benefits scheme has not resulted in significant financial shortfalls. However, if you opted out in favour of investments that hinged on stock market performances, then you may be dramatically worse off as a result. This is one of the most common situations where individuals discover they have been mis-sold SERPS alternatives.
First, you need to assess whether your private pension was mis-sold to you by an employer or an independent financial advisor (IFA). You can contact the firm that sold your financial product directly to query the difference between your actual pension and your theoretical SERPS entitlement. If their response is not satisfactory, then you can elevate your claim to the Financial Ombudsman Service (FOS).
Mis-Sold SERPS Claims from Money and Me Claims
Money and Me Claims is an independent financial claims management company that was established to help individuals find monetary restitution in cases where they have been mis-sold financial products/services. Roughly 5 million people opted out of SERPS, with no accurate estimation as to how many people are better or worse off as a result. We are dedicated to addressing this issue, by supporting individuals who were mis-sold SERPS alternatives and handling their claims with diligence and professionalism.