New state pension and COPE deductions

gwbuk

The statement about the new state pension starting amount calculation seems pretty clear:

> 1/35th of £155.65 for each qualifying year, up to a maximum of 35 years.

In the guidance it then says

> A deduction may be made for periods you were contracted out

Again pretty straightforward. But take the case where you've got 45 qualifying years of which 10 were contracted out. Applying the above rules strictly would suggest 155.65 for a maximum of qualifying 35 years, then some deduction after that for the 10 years contracted out. This seems harsh as an alternative interpretation would be there are 35 years of full non contracted out years so you should get the full amount. Strict interpretation of the guidance suggest the former, but is correct?

Linton

The years contracted out and the years for a full pension are totally separate calculations. So 45 years total NI with 10 years contracted out means your state pension is the £155 figure from your complete NI minus the COPE calculated from the 10 years.

The reason is that you receive extra personal or employer pension paid for from your contracted out years or you and your employer paid less NI. People who were contracted in have the benefit from their extra contributions included as part of the £155.

Ant555

minus the COPE calculated from the 10 years.

Is this a personal figure based on salary/value of reduced NI etc or is it something easy to work out such as
COPE deduction = years contracted out x a set amount

greenglide

COPE deduction = years contracted out x a set amount

Much more complicated than that.

It is very similar to the "Contracted Out Deduction" that was made under the old system that was subtracted from the Additional Pension to take away the SERPS amount that would would have been earned if you hadnt been contracted out.

It depends on amount earned and length of time contracted out and complex rules. It is earnings related during the contracted period and the rules have changed over time as well.

WBCPB

Surely there must be a standard formula/algorithm to calculate the COD amount? I have searched high and low on the internet but cannot find the answer,are millions of people just going to accept their COD deduction is correct,my forecast shows a £36 deduction but not any workings behind this figure?

Regards

greenglide

The COD has never been an easy to calculate amount. The rules are complex. You can always start with the WIKI articles about SERPS and GMP https://en.wikipedia.org/wiki/State_Earnings-Related_Pension_Scheme https://en.wikipedia.org/wiki/Guaranteed_Minimum_Pension.

You would, in all likelihood, need a data protection print or similar from HMRC of the data held on NIRS2 / NPS systems.

WBCPB

greenglide wrote: »

The COD has never been an easy to calculate amount. The rules are complex. You can always start with the WIKI articles about SERPS and GMP https://en.wikipedia.org/wiki/State_Earnings-Related_Pension_Scheme https://en.wikipedia.org/wiki/Guaranteed_Minimum_Pension.

You would, in all likelihood, need a data protection print or similar from HMRC of the data held on NIRS2 / NPS systems.

So each time a report is issued to a customer the civil servant behind the task has most likely spent many hours "calculating "the COD amount,multiply that by millions of customers and this just does not compute,there would not be enough hours/days/months to produce all the requested reports,so DWP must surely be using some type of standard calculation to get round this complex calculation?

Regards

greenglide

The HMRC NPS system (a rebadged version of NIRS2 I beleive, not to be confused with nSP) normally does the calculation. This is a huge system with millions of lines of code running on multiple large servers. The bulk calculations will not have been by hand since the seventies and possibly never.

I assume that DWP has, at times, to recalculate these amounts but generally this will still be done by HMRC apart from some very odd ones that are probably done using lots of spreadsheets etc.

Initially you need to get all the earning data to even start.

xylophone

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/204604/single-tier-pension-transition-technical-note.pdf

Read 2016 for 2017.

zagfles

WBCPB wrote: »

So each time a report is issued to a customer the civil servant behind the task has most likely spent many hours "calculating "the COD amount,multiply that by millions of customers and this just does not compute,there would not be enough hours/days/months to produce all the requested reports,so DWP must surely be using some type of standard calculation to get round this complex calculation?

Regards

The problem is the amount of data the calculation needs. You'll need your income every pay period since you were 16, not your taxable income but your NI'able income which can be different, ignoring income where you earned under the LEL that pay period, ignoring any income above the UEL, applying the relevant revaluation factors and accrual factors, applying the adjustment for different GMP age and state pension age (which I don't understand - but I guess it has to be adjusted), accounting for deferred indexation on any GMPs you may have from deferred contracted out schemes...

Yes I have had a go. I've got somewhere near but really, it wasn't worth it! NP46 is a good guide if you really want to try:

http://webarchive.nationalarchives.gov.uk/20100210072046/http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/@over50/documents/digitalasset/dg_180938.pdf

greenglide

Logically if HMRC have all your data on NIRS2 correctly over the years then you can fairly safely assume that the calculation is correct otherwise lots of people would also be wrong although whether they would know is a moot point.

A more worthwhile (although definitely non trivial) is to check that they have all the earnings and benefits / credits recorded correctly. You would a data protection print from HMRC for this as a minimum along with P60s for every employment you have had, periods of benefit etc.

Start of with a statement of NI contributions from HMRC - https://online.hmrc.gov.uk/shortforms/form/NIStatement

Back in the 90s there was a certain mount of concern over the replacement of the old NIRS system by the new NIRS2 system which was massively late nd just didn't work - a number of people that I worked with at the time got data protection prints off the old system as they were seriously concerned that some if the data may be lost or corrupted although I am not aware that any was.