State Pension and Contracting Out

SnowMan

zolablue25 wrote: »

Sorry, yes I just noticed that myself. It says....

Estimate based on your National Insurance record up to 5 April 2015 £127.86


Estimate if you contribute another 7 years before 2033 £155.65

If it makes any difference I woudl like ot think that I can put in the extra 7 years over the next 17.

Thanks

Your starting amount at April 2016 (what you've earned so far) will have been calculated on the higher of the old and new state scheme calculations. In your case the calculation is

OLD BASIS
= basic state pension + additional state pension
= 30/30 x 119.30 + 8.56
= 127.86pw

NEW BASIS
= 33/35 x 155.65 - 46.13 (COPE)
= £100.63pw

So the old basis is the higher amount and is the basis for your starting amount at April 2016 of £127.86pw

The 2015/2016 year when added in isn't going to make much difference, because the old basis calculation is quite a bit higher than the new scheme calculation, and you already have the required 30 years to maximise the old scheme calculation.

You may have a small amount of additional state pension for 2015/2016, if say you were contracted-in for that year, but ignoring that your starting amount is about £127.86pw.

You can add 1/35th of the new state pension, about £4.45pw (=155.65/35) to this starting amount for each post April 2016 Qualifying Year you get, up until you reach the full single tier pension of £155.65pw.

You will indeed need 7 post April 2016 Qualifying Years (e.g. years where you work and earn above £5,864 in a single job or get credits) to get you up to the full single tier pension.

127.86 + 4.45 (year 1) + 4.45 + 4.45 + 4.45 + 4.45 + 4.45 + 1.09 (year 7) = 155.65

If you get those 7 years then the simple answer is that your state pension will be £155.65pw (in 2016/2017 terms). You can't earn any further state pension for additional post April 2016 Qualifying Years above 7.

The single tier amount of £155.65pw currently increases in line with the triple lock (higher of earnings inflation, price inflation and 2.5%) so the amount you will eventually get will be based on £155.65pw plus these increases.

Ignore the references to COPE on the state pension online system; it isn't part of your state pension (and it isn't an addition to any private pension you have, although a roughly equivalent amount of your private pension will have resulted from you having contracted-out of the additional state pension).

bigadaj

zolablue25 wrote: »

Sorry, yes I just noticed that myself. It says....

Estimate based on your National Insurance record up to 5 April 2015 £127.86


Estimate if you contribute another 7 years before 2033 £155.65

If it makes any differnece I woudl like ot think that I can put in the extra 7 years over the next 17.

Thanks

So you should get the full flat rate pension so long as you contribute for those seven years.

The Cope figure is informative but can be misleading. This is the sum that you have would be paid from government assumptions about being contracted out, either through a final salary pension or a private ones ion that your NI contributions were diverted into.

The actual figure may well be different, but you'll get just the flat rate pension from the government and whatever you qualify for separately through your private pension.

zolablue25

Thanks Snowman and Bigadj. That has made it much clearer. I can now apply this new found knowledge to my wife's statement.

wakeupalarm

SnowMan wrote: »

You may have a small amount of additional state pension for 2015/2016, if say you were contracted-in for that year, but ignoring that your starting amount is about £127.86pw.

If the 2015/2016 year is also contracted out and the OP already has 30+ years under the old rules, will the COPE amount actually increase and thus reduce the starting amount by a pound or two?

t0rt0ise

wakeupalarm wrote: »

If the 2015/2016 year is also contracted out and the OP already has 30+ years under the old rules, will the COPE amount actually increase and thus reduce the starting amount by a pound or two?

Yes, I believe so. I found similar somewhere in one of the official examples.

SnowMan

wakeupalarm wrote: »

If the 2015/2016 year is also contracted out and the OP already has 30+ years under the old rules, will the COPE amount actually increase and thus reduce the starting amount by a pound or two?

No we we wouldn't expect the starting amount to reduce by a pound or two after 2015/2016 has been incorporated.

The COPE amount would increase and so the new rules calculation could decrease if someone already had 35 years. In this case qualifying years are below 35, and so there is an extra qualifying year which more than offsets this.

But more relevantly here the old rules calculation shouldn't reduce. The affect of 2015/2016 on that should be that there is no (or little) additional pension to add in for 2015/2016.

As the starting amount here is based on the old rules calculation, we wouldn't expect the starting amount of £127.86pw to materially reduce or increase.

But there is potentially a lot going on behind the scenes in getting to the additional pension figure, so best to wait until 2015/2016 is incorporated rather than make assumptions.