Confused by contracted out COPE

monty_pylon

Hi
I am baffled by the State Pension forecast where it refers to the Contracted out Pension Equivalent (COPE) figure and how this will apply. I worked in the public sector for over 30 years and understood that I was contracted out, which would mean receiving a lower state pension. Having obtained a State Pension forecast it says I have an almost complete NI record and will receive £138 per week, or £159 if I contribute for another 5 years. It does then give a link to the contracted out page, where I am told that my COPE estimate is £96 per week. Is that the amount less I will receive or the amount that they expect my contracted out pension to provide?. If the latter, how has being contracted out affected my state pension, which, from the estimate provided, looks like the maximum amount? I am 59, and will shortly be eligible for my public sector pension which will incidentally be more than £90 per week.

EdGasketTheSecond

Yeah we've been looking at this too but don't understand it. For the last few year's everyone's been 'contracted in' so that is why you are building back up to the maximum state pension. But what the COPE figure is I dunno; just checked wife's and it is around £8 per week.

xylophone

You were contracted out but nevertheless may still have earned some S2P even though contracted out between 2002 and 2016.

https://en.wikipedia.org/wiki/State_Second_Pension

S2P gives all employees earning up to £32,592 a year (in 2011/12) a larger pension than SERPS, regardless of whether they are "contracted out" or not - with most help going to those in the '"lowest"' earnings (up to £14,400 a year in 2011/12) - known as the "LET" or '"Low Earnings Threshold"'.


For calculation of your starting amount as at 6/4/16 see

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

but for BSP read £119.30 and for NSP £155.65.

hyubh

monty_pylon wrote: »

I am baffled by the State Pension forecast where it refers to the Contracted out Pension Equivalent (COPE) figure and how this will apply.

It is purely a notional figure to indicate how, if previously contracted out, your 'starting amount' at 6/4/16 was less than if you had contracted in, yet you haven't (in principle) lost out. In practice the figure is meaningless because it isn't one the scheme you contracted out with is beholden to. In practice your public sector scheme pension is well above the COPE though, but regardless, it wouldn't make a difference if for some reason it wasn't.

I worked in the public sector for over 30 years and understood that I was contracted out, which would mean receiving a lower state pension.

Things changed from 6/4/16 when contracting out was completely abolished, and you now stated earning years under a new flat-rate system that ignored old rules that prevented someone from latterly maxing out the state pension having contracted-out for decades previously.

Having obtained a State Pension forecast it says I have an almost complete NI record and will receive £138 per week, or £159 if I contribute for another 5 years. It does then give a link to the contracted out page, where I am told that my COPE estimate is £96 per week. Is that the amount less I will receive

No.

or the amount that they expect my contracted out pension to provide?

As above, only in a very tenuous sense.

If the latter, how has being contracted out affected my state pension, which, from the estimate provided, looks like the maximum amount?

You are benefiting from a change in the rules.

I am 59, and will shortly be eligible for my public sector pension which will incidentally be more than £90 per week.

Rub it in!

Tom99

If you don't work for the next 5 yrs you can top up to £159.55 by paying 5 yrs worth of Class 3 Vol contributions, about £740 per year I think. Very good value if the think you will live until at least age 69 or 70.

monty_pylon

Thanks for all the excellent replies and useful links. I conclude from the link provided by xylophone that the rules are fiendishly complex and I more or less have to wait until I retire to get a firm quote. However the worked example quite closely matches my circumstances so I expect the starting amount to be around £120 and I will certainly aim to keep up my NI contributions as suggested
Many thanks

GunJack

monty_pylon wrote: »

Thanks for all the excellent replies and useful links. I conclude from the link provided by xylophone that the rules are fiendishly complex and I more or less have to wait until I retire to get a firm quote. However the worked example quite closely matches my circumstances so I expect the starting amount to be around £120 and I will certainly aim to keep up my NI contributions as suggested
Many thanks

No, you really don't... sign up for the online service if you haven't already and you'll see it. If the statement you have says that, to date, you've earned £138-odd pw, then that's what you'll get (adjusted for inflation) when you retire. If you contribute another 5 years, you'll get the full amount of new SP (each year going forward adds £4.50ish pw to your current amount)

IGNORE COPE..it was a figure used ONLY ONCE to work out your starting amount in Apr 16 as the changeover from old to new SP systems. It IS NOT taken off your new SP figure, nor added to your LGPS. You will get your (new)SP AND your LGPS pensionsat the £ figures quoted to you by each of those schemes.

p00hsticks

monty_pylon wrote: »

However the worked example quite closely matches my circumstances so I expect the starting amount to be around £120

but in your original post you say that your current forecast is £138 ? Is that assuming you work until state retirement age of what it currently stands at ? Your forecast should show both figures.

You can completely ignore any mention of COPE in your forecasts - it may, or may not have had any significance in calculating your 'starting amount', but from April 2016, when contracting out was abolished, you simply accumulate 1/35th of the maximum amount (currently around £4.55) for each NI year added.

GibbsRule_No3

Still wanting to know if the 11 months from 2019 until March 2020 when my SP kicks in gives me anything or if those 11 months working are wasted when it comes to SP (I know it won't be wasted for my current employee pension fund and monthly wages)? It might determine if I retire December 2019 or wait until February 2020 though.

monty_pylon

Thanks GunJack/p00hsticks, and of course you are both right. I think my problem was that I have been unable to dispel the nagging concern that years of being contracted out were going to significantly shrink my state pension entitlement - a feeling not helped by numerous references to the consequences of being contracted out on Gov.UK and elsewhere, including a Pension Wise advisor who told me that at 66, my CSP would be reduced by the COPE amount!:shocked: - Hence the reason for my post.

GunJack

monty_pylon wrote: »

Thanks GunJack/p00hsticks, and of course you are both right. I think my problem was that I have been unable to dispel the nagging concern that years of being contracted out were going to significantly shrink my state pension entitlement - a feeling not helped by numerous references to the consequences of being contracted out on Gov.UK and elsewhere, including a Pension Wise advisor who told me that at 66, my CSP would be reduced by the COPE amount!:shocked: - Hence the reason for my post.

At the changeover from old to new SP, they calculated your entitlement at Apr 16 under both systems, and you get the higher of the two as your starting amount, hence the £138pw.

You, like me, are young enough to benefit from both the new SP AND having a decent contracted-out scheme.

If it helps, I'll be 51 in 2019 with full new SP entitlement earned, to go with my CS DB pension and current works DB (career ave) schemes on top We have just dropped lucky (for a change) when the rules changed....