Have I lost out because of Contracted Out Pension?

pricedout_1

I have just done a pension forecast on the government website which includes the following:-
"Contracted Out Pension Equivalent (COPE)

Your COPE estimate is£12.66 a week.

This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government."
This happened right at the start of my career when a company pension advisor at the time persuaded me it was a good idea.
So the government directive says that this amount will be paid out by whichever pension I was contracted out to at the time, but I've never seen this on any pension forceasts from any provider I am with. (I am also in the process of consolidating all of my frozen pensions to a Vanguard SIPP so not sure how that affects the COPE? Will Vanguard then make the COPE payment?)
Whoever invented contracting out should hung, drawn, and quartered!

p00hsticks

pricedout_1 said:

Whoever invented contracting out should hung, drawn, and quartered!

Why ? Statistically, you're probably going to be quids in!

You paid a lower rate of NI due to be contracted out. This was in return for being signed up to a company pension. You don't say what company that was, but presumably it was one of the deferred (not 'frozen' - that has a different meaning) pensions you say you are currently transferring to a SIPP. The £12.66 a week is simply a DWP estimate as to how much that company pension could be paying you - in practice it's usually more.    

And with the introduction of the new State Pension, when contracting in and out was abolished, you most likely have an opportunity to earn the same full pension as those who were previously contracted in and paying a higher rate of NI will get.

On the whole, it's those who are contracted out who are the winners from the recent State Pension reforms. 

comeandgo

Do you have a financial advisor helping you with the deferred pensions as you don't seem to understand contracted out and may not be making the best financial decisions.

xylophone

You appear to know when you contracted out. When was it? What kind of scheme was it?
What happened to this pension?
 

xylophone

And see link here https://forums.moneysavingexpert.com/discussion/comment/77484925/#Comment_77484925

dunstonh

Whoever invented contracting out should hung, drawn, and quartered!

The majority of people are better off because of contracting out.  So, why do you consider it negative?

So the government directive says that this amount will be paid out by whichever pension I was contracted out to at the time, but I've never seen this on any pension forceasts from any provider I am with. 

If you have an individual money purchase pension then you should have been sent a statement annually.  If you have a defined benefit scheme then you get an annual benefits statement whilst you are an active member.   

Contracting out through an occupational pension is different to contracting out through a personal pension.

 (I am also in the process of consolidating all of my frozen pensions to a Vanguard SIPP so not sure how that affects the COPE?

It doesn't.   

Will Vanguard then make the COPE payment?)

They don't. COPE isn't something you have.

I am also in the process of consolidating all of my frozen pensions to a Vanguard SIPP

If you have frozen pensions then you will need an adviser to be involved.    However, I suspect you dont mean frozen.

Dox

pricedout_1 said:

Whoever invented contracting out should hung, drawn, and quartered!

Why not find out the facts before you make these sweeping generalisations? 

Albermarle

I think it is fair to say that COPE figure has caused more confusion to people than it has brought enlightenment. Probably best just to ignore it .

I was contracted out of SERPS/SS2 for about 20 years . I did calculate a comparison ( which wasn't easy ) and I was better off being contracted out than in . However it depends to some extent how well the associated personal pension performed. Mine was 100% equities ( by accident not design ) so over 20 years did pretty well .

jamjar92

xylophone said:

And see link here https://forums.moneysavingexpert.com/discussion/comment/77484925/#Comment_77484925

If you read the link xylophone provided, the intro says it all. I was contracted out and under the new reforms will get a full state pension at the new rate when I reach retirement. At the time I was told it was good idea so I signed up.

The new State Pension Transition and Contracting-Out Introduction This factsheet explains the effect on the new State Pension of someone previously having been contracted-out of state earnings-related pension schemes. These schemes are collectively called ‘additional State Pension’ and comprise SERPS and S2P.  Introduction 1. Most people reaching State Pension age in the first couple of decades of the new State Pension, which starts on 6 April 2016, will have been contracted-out of the additional State Pension (SERPS, state earnings related pension scheme or S2P, state second pension) at some point. When people were contracted-out they either paid National Insurance contributions at a lower rate, or some of the National Insurance contributions they paid were used to contribute to a private pension instead of their additional State Pension. They will have been contracted-out through an occupational pension scheme where their pension was linked to their salary (defined benefit, DB); or through an occupational or personal pension scheme where contributions were invested and the final pension was determined by the outcome of those investments (defined contribution, DC). Most people – over 80% - would have received the full rate of new State Pension or more if their state pension had not been adjusted to take account of contracting-out.

Albermarle

 I was contracted out over 20 years but will still get the full state pension + I have a personal pension/DC pot as well .

If I had not contracted out I would have got full state pension + a SS2 top up . If I remember correctly there is a transitional arrangement where it is still possible for some people with sufficiently high earnings and not contracted out to get a SS2 top up.
I also remember the rules for calculating this top up were quite complicated .

*travel-bug*

I retired in 2017 after nearly 36 years in the Civil Service.  My state pension forecast shows that, even though I have accumulated enough qualifying years, I will not receive the full pension.  This is because I was always contracted out.  However, lucky me I'm doubly fortunate - not only do I have a Civil Service DB pension, I can also boost my state pension to almost the full amount by paying Voluntary NICs for the tax years 2017-2023. And then, supposing I’m still around at the time, I can recoup those voluntary payments in 3 years once my ‘enhanced’ pension comes into payment.  Can I get a wahoo?