Confused by COPE

wary

Just checked my state pension forecast. It says:
- Based on NI contributions up to Apr 2016: £154.09 per week
- If I contribute another year: £155.65 per week
- Full contribution years: 36
- COPE estimate: £29.92 a week
2016/17 will be another qualifying year (not included in the above).

I’ve read the guides and understand that COPE relates to contracting out etc.

One thing I’m totally confused about is whether the weekly amounts quoted (£154.09/£155.65) is what I’ll actually receive from HMRC? Or whether the COPE amount will be deducted from this and I’ll only receive circa £125 per week, on the basis that I’ll effectively receive an additional £30 per week from my employer's schemes as a result of having contracting out?

Please can someone confirm?

Regardless, is there anything to be gained to by accumulating further qualifying years after 2016/17 on the basis that, although I’ll already have 37 years, many of these were contracted-out years?

Thanks

bigadaj

The cope is an indication of the value of the contacted out element, it doesn't reduced the state pension.

You can't accrue above the single tier amount, but you're a winner in so far as paying less NI over the years hasn't reduced your state pension but has built up a separate pot.

bowlhead99

They did a test to see what pension you had built up using the old method and the new method.

Basically, you have over 35 years in the bank so they would be willing to let you have the full standard pension of £155 less the £30 of COPE. That would be about £125.

However, under the other method they have assessed that you're entitled to £154 (some basic amount plus SERPS / S2P etc from when not contracted out).

As the £154 is higher than the £125, you can keep that as your starting amount as of this April.

As your starting amount isn't quite at the full single tier level, then going forward, every year of contributions you record would get you 1/35th of £155, until you hit £155 and then it will stop going up.

As you can see, even one more year (2016/17) would see you hit that cap of £155.65, so that's what you'll receive, even if you carry on contributing in 17/18, 18/19 etc.

But you won't need to deduct your £30 contracted out pension equivalent. That was just a theoretical number to decide where to start you off at, after which they decided £154, based on contributions.

As they said, "If I contribute another year: £155.65 per week", so that's your answer.

wary

bigadaj wrote: »

The cope is an indication of the value of the contacted out element, it doesn't reduced the state pension.

You can't accrue above the single tier amount, but you're a winner in so far as paying less NI over the years hasn't reduced your state pension but has built up a separate pot.

Thanks for that.

As I understand it, according to my forecast, my qualifying years are such that I'll receive the maximum state pension even if I don't work past the end of the current tax year. So does this mean that there would be nothing gained by me accruing additional qualifying years beyond 2016/17 as it won't increase my state pension?

This is an important consideration as I may well decide to retire imminently.

bigadaj

Yes, no real benefit in terms of accruing further state pension with paying NI for future tax years.

wary

bowlhead99 wrote: »

They did a test to see what pension you had built up using the old method and the new method.

Basically, you have over 35 years in the bank so they would be willing to let you have the full standard pension of £155 less the £30 of COPE. That would be about £125.

However, under the other method they have assessed that you're entitled to £154 (some basic amount plus SERPS / S2P etc from when not contracted out).

As the £154 is higher than the £125, you can keep that as your starting amount as of this April.

As your starting amount isn't quite at the full single tier level, then going forward, every year of contributions you record would get you 1/35th of £155, until you hit £155 and then it will stop going up.

As you can see, even one more year (2016/17) would see you hit that cap of £155.65, so that's what you'll receive, even if you carry on contributing in 17/18, 18/19 etc.

But you won't need to deduct your £30 contracted out pension equivalent. That was just a theoretical number to decide where to start you off at, after which they decided £154, based on contributions.

As they said, "If I contribute another year: £155.65 per week", so that's your answer.

Thanks for that - very clearly explained, which was just what I needed.

I guess you've answered the supplementary question that I just posted, that there is nothing to be gained by me accruing additional qualifying years beyond 2016/17.

As a secondary supplementary question, please, is the amount specified on the forecast at today's prices, and the actual amount I'll start receiving when I eventually reach 67 (in 12/13 years time) will have been indexed up from this? If so, how will the indexing be derived each year?

bowlhead99

wary wrote: »

As a secondary supplementary question, please, is the amount specified on the forecast at today's prices, and the actual amount I'll start receiving when I eventually reach 67 (in 12/13 years time) will have been indexed up from this? If so, how will the indexing be derived each year?

Yes, that's this year's figure; they can't tell you the figure for 12/13 years time because that won't be determined until nearer the time.

You'll basically receive the same as everyone else who had a standard (non enhanced) pension of that figure this year, using the same index as them. Hopefully (for the rest of us taxpayers) they'll reduce the allowed indexation on state pensions by then