State pension forcast: what does ‘full contribution year’ mean?

molerat

COPE is only used in calculating the April 2016 starting amount and deciding which calculation is applicable, it is not used again. It will not be added to or deducted from either your state or workplace pensions. It is best to forget that it even exists because in the real world it does not

Your workplace pensions are governed by their own rules. Some old bank and insurance pensions used to have a deduction at state pension age but not so likely now and the inflation uprating may be different for some parts of the pension due to the GMP figure.

xylophone

https://www.gov.uk/government/publications/state-pension-fact-sheets/contracting-out-and-why-we-may-have-included-a-contracted-out-pension-equivalent-cope-amount-when-you-used-the-online-service

Programmer

Thank you both , I will plough my way through xylophone's link and if I'm still none the wiser I will take molerat's advise and forget about COPE. Molerat - I am not entirely sure about deductions from my workplace schemes at state pension age. In the 1990s my insurer merged with another and there was some discussion about the merits of the final salary schemes operated by the two companies, because some people had the opportunity to transfer their employment to the other company. I remember it being said that their scheme was superior to ours because it didn't have 'clawback'. I never found out what 'clawback' was but it sounds distinctly impoverishing. The word gives me a mental picture of Ebenezer Scrooge extending his claw-like fingers to sieze a widow's last mite. I suppose the only way to find out is to delve into the details of the two schemes. But from what you say, if there is a deduction it won't be related to COPE.

molerat

Programmer wrote: »

But from what you say, if there is a deduction it won't be related to COPE.

Correct.

What used to happen with these old schemes is they had an early normal retirement age where they paid you (a good) £x per year. Then at 65 they paid you £x - state pension amount. That meant you could retire fairly young and have the same steady income that you would have if you retired at SP age. The scheme overall paid out the same as it would if you retired at 65 but you got a good amount of it early.

xylophone

http://www.web40571.clarahost.co.uk/archive/saga/2000_and_before/990202.htm

https://forums.moneysavingexpert.com/discussion/3886143

Programmer

Thanks xylophone, that's interesting. It looks like I'll have to examine the rules in both pension schemes to find out what I can expect to happen in 2024. From those links it appears if there is clawback it's likely to be a fixed amount. My worst fear was the pension provider would make enquiries what my state pension was and pay me that amount less. That looks unlikely.

xylophone

GMP age for males is 65, even though your SPA is 66.


Normally in DB Schemes in operation 1978-1997:-

After GMP age, your scheme has no obligation to index link that part of your pension that represents pre 88 GMP but must index link post 88 GMP in payment up to 3%.

The excess will be index linked in payment by scheme rules.

The above does not affect any "clawback" (SP reduction/abatement).

If you do not have a scheme booklet which explains the above, check with your administrator.

You would expect to receive a letter from the administrator at GMP age showing the split of your pension.

gilly56

Can anyone help me understand my forecast please? I will be 66 in Sept 2021 (female). It shows forecast as £159.55 per week. It also states "Estimate based on your NI record up to 5/4/2016 £137.81 per week" and "Forecast if you contribute another 5 years before 5/4/2021 £159.55 per week".

When I go to the 'Summary' page it clearly states that I have 38 years of full contributions. (I understand you need 35 years for the new flat-rate pension). My last 'Full year' NI record was 2012-13 after which I took early retirement and stopped paying NI. So can I assume my forecast is definitely the £159.55 figure and not the £137.81?

bigadaj

gilly56 wrote: »

Can anyone help me understand my forecast please? I will be 66 in Sept 2021 (female). It shows forecast as £159.55 per week. It also states "Estimate based on your NI record up to 5/4/2016 £137.81 per week" and "Forecast if you contribute another 5 years before 5/4/2021 £159.55 per week".

When I go to the 'Summary' page it clearly states that I have 38 years of full contributions. (I understand you need 35 years for the new flat-rate pension). My last 'Full year' NI record was 2012-13 after which I took early retirement and stopped paying NI. So can I assume my forecast is definitely the £159.55 figure and not the £137.81?

No, the estimate assumes you will be working or at least getting NI credits for the next 4 years.

So you'll currently get the lower figure, slightly updated for inflation over teh intervening period.

You should be able to purchase additional years for the difference, the figures sound like you were contracted out for at least some of your working life, the effect of which is equated by any cope figure quoted. The cope figure is an indication of what you're contracted out contributions would be worth if they paid as NI, the actual value would be contained within your contracted out pension, and you will exist the figures quoted, or somewhere in between if you buy some years before retirement.

p00hsticks

gilly56 wrote: »

(I understand you need 35 years for the new flat-rate pension).

The 35 years is only for those starting their working life now. As you have spent many years working under the old rules (where the basic pension amount was lower) you may need more years to reach the new maximum if you have previously been contracted out - other who have been contracted in, and so paying a higher rate on NI in the past may need less.

Hence the importance of everyone checking their own individual forecasts.