What happens with the State Pension COPE amount at retirement?

happyhero

Hi I have been reading a bit online about this COPE (Contracted Out Pension Equivalent Estimate) figure on my pension statement and still feel I am not sure about it, can anybody answer my questions and guide me please?


I am 57 and worked since school in BT until I was 44. My statement shows I will get my state pension at 66 years and 10 months old. I read that most people were contracted out and I was too and that this meant money could have been paid somewhere else while paying lower NI payments but I had no other pension other than my BT pension in all those years, which was a final salary pension.


My COPE figure is £85.27/w, what does that actually mean for me, will I get this paid to me on top of my state pension?


Why do they not round this up and give a yearly figure amount too like they do with the other state pension figures?


Or is it just showing what it is worth per week and has actually gone into my BT pension (My BT pension forcasts dont seem have any mension of this figure)?

Flugelhorn

re the COPE The site says

"This will not affect your State Pension forecast.
The COPE amount is paid as part of your other pension schemes, not by the government In most cases the private pension scheme you were contracted out to:

will include an amount equal to the COPE amount
may not individually identify the COPE amount" .

Or is it just showing what it is worth per week and has actually gone into my BT pension (My BT pension forcasts dont seem have any mension of this figure)?

yes it will be included in the BT pension and not listed separately

Linton

In April 2016 your state pension was recalculated and the value at that time was set as a basis for future contributions. COPE was one of several factors in that calculation. After April 2016 it has no affect and can be ignored. I guess they are still providing the value in statements to provide a quick explanation to people who arent getting the full new pension despite having paid NI for 35 years.

happyhero

Flugelhorn wrote: »

re the COPE The site says

"This will not affect your State Pension forecast.
The COPE amount is paid as part of your other pension schemes, not by the government In most cases the private pension scheme you were contracted out to:

will include an amount equal to the COPE amount
may not individually identify the COPE amount" .


yes it will be included in the BT pension and not listed separately

Thank you Flugelhorn but shouldn't it then be shown on my BT pension forcast, as an illustration to show how it has benefitted my BT pension?

I would have thought it would have been something worth avertising like "Wow look how COPE has benefitted you more than would have been the case had you not contracted out" type of thing.

Flugelhorn

Suppose it is because these pensions are calculated in a specific way assuming that you are contracted out. Not sure that anyone would have been contracted out and paying into the BT pension (maybe they would?? )

Silvertabby

happyhero wrote: »

Thank you Flugelhorn but shouldn't it then be shown on my BT pension forcast, as an illustration to show how it has benefitted my BT pension?

I would have thought it would have been something worth avertising like "Wow look how COPE has benefitted you more than would have been the case had you not contracted out" type of thing.

Forget COPE - it was used in the calculation of your foundation amount (ie, State pension as at April 2016) and will never be seen again.

The nearest equivialent you'll get is that your COPE is the amount of additional State pension (SERPS/SP2) that you gave up by being contracted out and paying reduced NI contributions. Yes, this is included in your BT pension - but you'll never see this actual figure in your BT documents as it isn't part of your BT calculation. Phew, what a palaver!

Are you still working/paying NI? If so, you've got the cherry as well as the icing - you had the benefit of paying reduced NI, will have the benefit of a good occupational scheme, plus have time to top up your State pension to the maximum £159 per week.

hyubh

happyhero wrote: »

Thank you Flugelhorn but shouldn't it then be shown on my BT pension forcast, as an illustration to show how it has benefitted my BT pension?

'COPE' is not a thing for the scheme, i.e. it has nothing to do with how the BT benefits are calculated. While 'COPE' is a relatively new concept, it succeeds the 'contracted-out deduction' (COD) that was applied to state pensions in payment; but again, the COD was a figure calculated by and for the state in relation to the state pension, rather than the scheme in relation to the scheme pension (http://researchbriefings.files.parliament.uk/documents/SN02674/SN02674.pdf).

I would have thought it would have been something worth avertising like "Wow look how COPE has benefitted you more than would have been the case had you not contracted out" type of thing.

It would be pretty pointless advertising something that they aren't selling though, no...? In fact, given how pension fund liabilities are typically calculated, it would be in BT's interests for you to think you've been conned and transfer out in a huff!

dunstonh

I would have thought it would have been something worth avertising like "Wow look how COPE has benefitted you more than would have been the case had you not contracted out" type of thing.

Contracting out means different things with different schemes. Some see less NI being paid and the scheme guaranteeing to pay the defined benefits. Some got NI rebates paid into their pension (but paid the higher rate of NI).

You paid less NI and the BT scheme had its defined benefits. There is no reason for the scheme administrators to advertise how you benefitted as the NI position would have been stated in the original scheme booklet.

For example, take from the Explanatory booklet for Section A Members of the BT Pension Scheme.
(BT employees who joined the Post Office before 1 December 1971). - 2015 version

Your employment is contracted out of S2P and you pay lower National Insurance
contributions. As a result you do not build up any S2P but an equivalent amount of pension
will be provided as part of your BTPS pension. There may also be a small S2P pension
payable if your earnings were below certain limits for National Insurance purposes.

woolly_wombat

hyubh wrote: »

It would be pretty pointless advertising something that they aren't selling though, no...? In fact, given how pension fund liabilities are typically calculated, it would be in BT's interests for you to think you've been conned and transfer out in a huff!

Ha Ha!

Ain't that just the truth!

Linton

One problem with taking COPE too literally is that the contracted out rules changed several times over the years. At some times some benefit was assumed to be provided within the DB pension, at others the NI you paid included a contribution to a private pension. They key factor is that you paid less NI because you were not entitled to the state Earnings Related pension which was an addition to the basic state pension.

When the new scheme came in, the Earnings Related part was merged in with the basic SP which is basically why the the post 2016 pension is higher than the old one. The changeover of schemes was intended to be broadly cost neutral. Clearly it would be unfair and expensive if those people who never paid in full for the Earnings Related pension nevertheless got the benefits. Hence COPE, which was a measure of the amount of the benefit you didnt pay for and would never have got because of contracting out.

happyhero

Thanks guys can't help feeling though that I am totally in the dark about how any extra payments via COPE going into my BT pension are being used, ie are BT taking any exobidant fees or making any charges and are they maximising it's effect for me or doing something with it that suits them.

It makes me think about how they had to reduce/regulate the charges for investing in funds as there were lots of complaints about fees but with these COPE transfers into pensions I get the impression people will not be so aware as the process seems much more burried in the system than the example of funds I give, and so would be allowed to run riot.

I'm not that knowledgeable about this sort of stuff so sorry if I explain it poorly but hopefully you understand the gist of what I am saying.