Contracted out deduction (COD)

slinga

My OAP will start shortly.
I will get the max Gov pension but recently received a letter stating that my pension will not be effected by the COD which they were informing me was so much per week.

What is this COD and where is the deduction made if not on my Gov pension???

xylophone

http://forums.moneysavingexpert.com/showthread.php?p=60319901#post60319901post 18

http://forums.moneysavingexpert.com/showthread.php?t=4532605

my pension will not be effected by the COD which they were informing me was so much per week.

I am puzzled by this - see above. If you have a COD it does affect the amount of additional state pension you receive.

slinga

'my pension will not be effected by the COD which they were informing me was so much per week.'

The letter I received from HMRC states, 'This letter is for information purposes only and will not affect the amount of pension quoted to you by The Pension Service'.

Well the Pension service quoted me the full pension.
I wasn't expecting any additional state pension.
What might that be???
Has it got something to do with SERPS.

Will my company pension be affected?

zagfles

It's stupidly complicated.

Up till 1997, even if you were in a contracted out pension scheme (eg final salary), you still earned SERPS but there was a COD applied which was usually about the same. But there are various complications, like if you left the scheme, a part of it called the Guaranteed Minimum Pension (GMP) usually increases at a flat rate, and the COD increases at the same rate, so the COD can get out of step with SERPS.

Also there were inflation guarantees in SERPS which don't apply to the GMP, which means your SERPS entitlement could increase at a higher rate than your COD in future years of your retirement, so even if you get no SERPS at first, you could get some in 10 years time!

That's a very brief summary!!

slinga

Thanks xylophone, having read your links I think I get it.
Will only find out for sure once payment is made.

One problem has been that pension notices have been sent to me from my local office and from Newcastle and they always deal with different things and no ref made to the other.

My ASP is lower than my COD so my ASP is wiped clean but the difference is not taken from any other pension pot, as I now understand it.

Thanks for the help.

dunstonh

The basic state pension is not affected by contracted out elements. It only applies to the additional state pensions.

The letter tells you what additional pensions you have given up by being contracted out (and usually tells you where it is) and that the figures they mention are not being deducted from the basic state pension.

slinga

Also thanks to zagfles. I don't see a thank you tag under your post so can't click it.

Also thanks dunstonh.
Why aren't I seeing any thank you tags to click on???