Contracted out

ashpan

I’ve discovered I’ve had several long periods of being ‘contracted out’ of both the NHS and Local Government. Can someone explains what this means and how it will affect my retirement and also who the NI contributions will have been contracted out to please? 

Dazed_and_C0nfused

You may well be a winner under the new system.

Having paid lower NI whilst contracted out and now being able to build up to the new State Pension amount.

Have you checked your State Pension forecast on gov.uk?  Making sure you read past the likely headline of £175.20 to see what you have actually accrued to 5 April 2020?

And how old are you?

xylophone

I’ve discovered I’ve had several long periods of being ‘contracted out’ of both the NHS and Local Government. 

Do you mean that you have been/still are a member of the NHS pension scheme and LGPS?

Until 6.4.16, the Schemes were contracted out of  the State Earnings Related Pension Scheme  (SERPS) (until 2002)  and its successor, State Second Pension (S2P).

This meant that both you and your employer paid lower rates of National Insurance because  you and your employer were contributing to your Defined Benefit Pension Scheme.

Have you obtained a State Pension Forecast? If so, what exactly does it say?

If not, get one here  https://www.gov.uk/check-state-pension.

It will show a COPE (described  in link below as "Rebate Derived Amount").

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

On 6/4/16, two calculations were done in respect of your state pension.

NI years (up to 30)/£119.30 (Basic State Pension) + (SERPS/S2P - Contracted Out Deduction)

{NI years (up to 35)/£155.65 (New State Pension)} - COPE.

Your "starting amount" for NSP was the higher of the two.

If it was under a full NSP,  there was the possibility (depending on individual circumstances), of increasing it up to the full amount by contributions or credits for years up to your State Pension Age.

More here https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

ashpan

Dazed_and_C0nfused said:

You may well be a winner under the new system.

Having paid lower NI whilst contracted out and now being able to build up to the new State Pension amount.

Have you checked your State Pension forecast on gov.uk?  Making sure you read past the likely headline of £175.20 to see what you have actually accrued to 5 April 2020?

And how old are you?

I’m 62 I’ll get around £169.95 per week 

ashpan

£175.20 is the most I can get if I continue paying for another 2 years 

ashpan

xylophone said:

I’ve discovered I’ve had several long periods of being ‘contracted out’ of both the NHS and Local Government. 

Do you mean that you have been/still are a member of the NHS pension scheme and LGPS?

Until 6.4.16, the Schemes were contracted out of  the State Earnings Related Pension Scheme  (SERPS) (until 2002)  and its successor, State Second Pension (S2P).

This meant that both you and your employer paid lower rates of National Insurance because  you and your employer were contributing to your Defined Benefit Pension Scheme.

Have you obtained a State Pension Forecast? If so, what exactly does it say?

If not, get one here  https://www.gov.uk/check-state-pension.

It will show a COPE (described  in link below as "Rebate Derived Amount").

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

On 6/4/16, two calculations were done in respect of your state pension.

NI years (up to 30)/£119.30 (Basic State Pension) + (SERPS/S2P - Contracted Out Deduction)

{NI years (up to 35)/£155.65 (New State Pension)} - COPE.

Your "starting amount" for NSP was the higher of the two.

If it was under a full NSP,  there was the possibility (depending on individual circumstances), of increasing it up to the full amount by contributions or credits for years up to your State Pension Age.

More here https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

xylophone said:

I’ve discovered I’ve had several long periods of being ‘contracted out’ of both the NHS and Local Government. 

Do you mean that you have been/still are a member of the NHS pension scheme and LGPS?

Until 6.4.16, the Schemes were contracted out of  the State Earnings Related Pension Scheme  (SERPS) (until 2002)  and its successor, State Second Pension (S2P).

This meant that both you and your employer paid lower rates of National Insurance because  you and your employer were contributing to your Defined Benefit Pension Scheme.

Have you obtained a State Pension Forecast? If so, what exactly does it say?

If not, get one here  https://www.gov.uk/check-state-pension.

It will show a COPE (described  in link below as "Rebate Derived Amount").

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

I’m still paying into LGPS and started taking my NHS pension a couple of years ago 

xylophone

I’m still paying into LGPS 

£175.20 is the most I can get if I continue paying for another 2 years 

You have not been contracted out since 2016.  Will you be working and paying/being credited with NI for the  required two years?

ashpan

xylophone said:

I’m still paying into LGPS 

£175.20 is the most I can get if I continue paying for another 2 years 

You have not been contracted out since 2016.  Will you be working and paying/being credited with NI for the  required two years?

I’ve been on long term sick since March and not yet able to return - full pay til end of this month then half pay. I want to retire in March 2021

xylophone

You can check your position with regard to NI  - if you were short a year you could make voluntary contributions?