Does anyone know anything about the optional National Insurance pension fund?

[AbsOfCroissant]

I was on the bus and saw the advert about NI rebates. So, apparently the NI goes into two pension funds - one is the state pension, which is obligatory, and the other is an optional pension fund which you pay into, unless you/your employer chooses to opt out.

I'm trying to find out from my employer whether or not my work pension is opted out, but in the meantime, was wondering if I could do the following. If I could, I would like to set up a separate investment (as I think it has to go into some kind of investment scheme), but name my parents (rather than me) as the beneficiaries. Anyone know if this is possible?

Who is your Employer?

civil service pensions may be opted out of the State pension scheme.

There used to be a Married Womans opt out on NI stamps. But that may be discontinued for new aplicants now.

Which Bus were you on?

Have you tried looking up "National Insurance Contributions" on Google?

Try www.hmrc.gov.uk or www.dwp.gov.uk

Or go and look for the bus with the advert going past again and note down the details and phone number.

In theory, your National Insurance contributions are put aside for your pension when you reach retirement age. In practice, your NI contributions pay for todays OAPs.

Your pension will be made up of the basic state pension and SERPS as it was or the State Second Pension, commonly known as S2P.

Your employer's pension can either be 'Contracted In' or 'Contracted Out' of S2P.

If contracted out, then you can do nothing further and the employer pays a lower NI rate by providing a guarantee about a minimum pension they will provide. If your employer's pension scheme is 'Contracted In', then you can indeed 'Contract Out' yourself and the government pays the rebates in to a pension fund in your own name. You should seek advice of an IFA as to whether this is good advice for you.

However, the option to 'Contract Out' of S2P is being scrapped in 2012, so even if you do contract out now, you won't get much saved up in two years.

Your pension fund can only provide retirement benefits for you, you can't nominate someone else to receive them unless you died before reaching pension age. For a normal pension, your dependents would receive the pension benefits. For the contracted out S2P pension fund, if you died before pension age, then the fund must be used to pay an income to your spouse.

The married womens stamp was scrapped years ago.

Thanks! My employer is in the private sector. I think that they've contracted out.

It was the number 13 bus going from Golders Green if that's any help

SERPS secondary earnings related pension if contracted out can be moved fund, but not removed from pension. Until September 2008 SERPS had to be kept in protected funds and could not be used in riskier pensions such as SIPS and a WRAP. However, in septemeber 2008 this changed and you may incorporate your SERPS into SIPS and a WRAP.
Again a good IFA will advise you.