New state pension and COPE deductions

john-306

SnowMan wrote: »

We still need to know the figure accrued to date (i.e based on contributions to 5th April 2015).

On the forecast tab there should be an amount described as 'Amount based on your latest National Insurance Record (5th April 2015)

What is showing as that figure?

Oh sorry I missed that out.
Amount based on your latest National Insurance record (5 April 2015)

• £140.38 a week

Amount you may get to if you continue to contribute

• £155.65 a week

zagfles

john-306 wrote: »

Oh sorry I missed that out.
Amount based on your latest National Insurance record (5 April 2015)

• £140.38 a week

Amount you may get to if you continue to contribute

• £155.65 a week

So you'll probably need another 3 or 4 years to get the full state pension - depending on what your 2015/16 record adds to that figure.

Check again in 6 months or so by which time the 2015/16 record will hopefully be added.

SnowMan

john-306 wrote: »

Summary

39 years of full contributions
11 years to contribute before 2027
0 years when you did not contribute enough


Your State Pension forecast £155.65
Your COPE estimate £30.86
COPE added to your State Pension forecast £186.51

john-306 wrote: »

Oh sorry I missed that out.
Amount based on your latest National Insurance record (5 April 2015)

• £140.38 a week

Amount you may get to if you continue to contribute

• £155.65 a week

No problem we can now work things out:

Your starting amount at April 2016 is based on the higher of the old (existing) state scheme rules and new state scheme rules calculations (I've ignored any additional pension you might earn for 2015/2016)

OLD RULES
= basic state pension + additional pension
= (30/30 x 119.30) + 21.08
= 140.38

NEW RULES
= 35/35 x 155.65 - 30.86 (COPE)
= 124.79

So your starting amount at April 2016 (what you've earned so far) is based on the higher old rules calculation of £140.38pw in your case.

You can earn an extra 1/35th of the new state pension, £4.45pw (=1/35 x 155.65) for each post April 2016 Qualifying Year, which adds to your starting amount, until you get up to the full single tier pension.

If you get at least 4 post April 2016 Qualifying Years (so that might be the 2016/2017, 2017/2018, 2018/2019 and 2019/2020 tax years or some later years) that will get you up to the full single tier pension of £155.65pw as

140.38 + 4.45 + 4.45 + 4.45 + 1.92 = 155.65

The fourth year earns you the smaller bit that gets you up to £155.65pw, and you can't earn any more for any further post April 2016 Qualifying Years (above these 4)

So your state pension (assuming you get 4 post April 2016 Qualifying Years) will be £155.65pw in 2016/2017 terms. The £155.65pw will increase up to State Pension Age at least in line with earnings inflation, and currently in line with the triple lock (higher of earnings inflation, price inflation and 2.5%)

And Zagfles is right you should check again in 6 months when 2015/2016 is incorporated into records, it may only be 3 post April 2016 years you need.

john-306

SnowMan wrote: »

No problem we can now work things out:

Your starting amount at April 2016 is based on the higher of the old (existing) state scheme rules and new state scheme rules calculations (I've ignored any additional pension you might earn for 2015/2016)

OLD RULES
= basic state pension + additional pension
= (30/30 x 119.30) + 21.08
= 140.38

NEW RULES
= 35/35 x 155.65 - 30.86 (COPE)
= 124.79

So your starting amount at April 2016 (what you've earned so far) is based on the higher old rules calculation of £140.38pw in your case.

You can earn an extra 1/35th of the new state pension, £4.45pw (=1/35 x 155.65) for each post April 2016 Qualifying Year, which adds to your starting amount, until you get up to the full single tier pension.

If you get at least 4 post April 2016 Qualifying Years (so that might be the 2016/2017, 2017/2018, 2018/2019 and 2019/2020 tax years or some later years) that will get you up to the full single tier pension of £155.65pw as

140.38 + 4.45 + 4.45 + 4.45 + 1.92 = 155.65

The fourth year earns you the smaller bit that gets you up to £155.65pw, and you can't earn any more for any further post April 2016 Qualifying Years (above these 4)

So your state pension (assuming you get 4 post April 2016 Qualifying Years) will be £155.65pw in 2016/2017 terms. The £155.65pw will increase up to State Pension Age at least in line with earnings inflation, and currently in line with the triple lock (higher of earnings inflation, price inflation and 2.5%)

And Zagfles is right you should check again in 6 months when 2015/2016 is incorporated into records, it may only be 3 post April 2016 years you need.

Impressive, thank you.
So my forecast that COPE was added on to my pension on the website is as I assumed, incorrect and should be taken off, but that I can then make up the COPE deduction with extra qualifying years back to the £155.65, even though I'll be getting the contracted out part of the private pension in addition which as of 2014 statement is around £20 pw?

SnowMan

john-306 wrote: »

Impressive, thank you.
So my forecast that COPE was added on to my pension on the website is as I assumed, incorrect

The DWP would probably argue that what they are doing is correct because they are showing what pension you are getting out of paying your national insurance contributions.

The £155.65pw state pension is paid by the state and so clearly results from national insurance contributions (sort of).

But because over some time period you either paid lower (contracted-out) national insurance along with your employer, or had some of your national insurance contributions paid over into your own private pension pot, the pension those contributions might provide, which they estimate to be £30.86pw in your case, ultimately emanates from your national insurance. Had that national insurance not been redirected to your private arrangement then there would be extra money in the 'national insurance fund' to pay you more state pension. So that is why they add the £30.86pw onto the £155.65pw. All fair enough so far perhaps.

The trouble with this is that it creates an expectation amongst people that they are going to be paid an extra COPE amount, £30.86pw (say), of pension that they didn't know about. That's not entirely unreasonable because COPE isn't mentioned on any of their private pension statements, because it is a term recently invented by the DWP. And so therefore people think 'it must be additional'. Others who skim their state pension statement more quickly, or who get into a mindset that all pensions are too difficult to understand, simply think the state will be paying them £186.51pw or whatever because they just see the total figure on their statement.

So that's why many of us (myself included) are saying here that the state pension statement should just show your state pension (and shouldn't add on COPE at any point), in the same way that if you look at your Santander 123 account balance, you don't expect it to include the amount in your Tesco savings account as well.

Essentially what they are calling COPE is just part of your private pension. It won't be a separate payment from anyone

Exactly

JezR

COPE is something that came in with strong support from Ross Altmann, so may not go until she does.

She couldn't see why mention of contracted out deduction in some manner had dropped out of pension forecasts.

The pensions industry hate it because it can expose poor performance, as well as the false misunderstanding by some that you get this extra amount from them on reaching SPa.

Sipowicz

^^^^^^^^^
So when do you get it........at 65? (GMP age).

xylophone

So when do you get it........at 65? (GMP age).

You seem to have misunderstood - see below.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512799/your-state-pension-statement-explained-dwp042.pdf

john-306

SnowMan wrote: »

So that's why many of us (myself included) are saying here that the state pension statement should just show your state pension (and shouldn't add on COPE at any point), in the same way that if you look at your Santander 123 account balance, you don't expect it to include the amount in your Tesco savings account as well.

Exactly

Thanks again, you explain it well.
Can I just ask a final few questions...
Will I still get all my forecasted £155.65 or will that assumed £30.86 COPE be deducted, then whatever my contracted out private pension ends up at hopefully take it back up to £155.65.
This is what I initially thought would happen.
I'm wishing I had never contracted out now if it's this confusing, (well to me it is).

zagfles

john-306 wrote: »

Thanks again, you explain it well.
Can I just ask a final few questions...
Will I still get all my forecasted £155.65 or will that assumed £30.86 COPE be deducted, then whatever my contracted out private pension ends up at hopefully take it back up to £155.65.
This is what I initially thought would happen.
I'm wishing I had never contracted out now if it's this confusing, (well to me it is).

1. Get a pair of scissors.
2. Neatly cut out the COPE section of your statement
3. Feed it through your shredder, burn it, or use it to line your guinea pig's cage