COPE

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As I just read the latest MSE email, I logged onto dot gov and pulled up my pension forecast.

My estimate based on my NI record is £185.04, if I contribute another year before I hit retirement age it goes up to the maximum I can get £185.15.

I do have a short year that I can buy for £443, but it isn't worth paying £443 in to get 11p a week back.

Fine so far.

Now I was contracted out of SERPS for nearly 30 years, and there is a COPE estimate of £67.55.

So as I don't trust The Government to do anything except take from me, does the COPE mean

a) I would have got £185.04 + £67.55 = £252.59 if I wasn't contracted out, but I was so I will get £185.04 (which they then tax down to £148)

b) I actually get £185.04 - £67.55 = £117.49 (after tax £93.99)

If it is a) as I hope but seriously doubt, the amount of the COPE is irrelevant, so logically it has to be b)   :'(

p00hsticks

It's a). (As an aside, you can only really deduct tax if you have other income that uses your personal allowance - the State Pension is taxable but paid gross and is less than the standard tax allowance).  

As your forecast should say immediately below the COPE figure 'This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.'

(But it's unlikely that the amount you get from the other pension scheme wil lbe exactly equal to the COPE figure)

The COPE amount was used in April 2016 to cacluate your 'starting amount' when the new State Pension was introduced which is why they give it, even though it has no further significance.

If you need more than 35 years to reach the maximum new State Pension amount,. the presence of a COPE figure goes some way to explaining why.

biscan25

You'll receive £185.
The COPE is a measure of the "benefit" from your private scheme you receive as a result of being contracted out.
I guess you must have at least a couple of complete years pre 2016 where you were not contracted out?

xylophone

If your forecast is for £185.04 then this is what you will receive.

Your COPE was used once only in calculating your starting amount for new state pension as at 6/4/16.

Two calculations were done for you.

Old Rules

NI years/30 x (Full Basic SP) +  (Additional State Pension -   Deduction for Contracting Out)

New Rules

(NI years/35 x Full New State Pension) -  Contracted Out Pension Equivalent.

Your "starting amount" for new state pension was the higher of the two.

If it was lower than a full new state pension, then you could i increase it up to (but not beyond) the full amount through further contributions/credits.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

Above is very basic explanation  produced pre introduction of NSP- the actual amount of NSP at inception was £155.65.

xylophone

If more detail required, see

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet

Marcon

facade said:

If it is a) as I hope but seriously doubt, the amount of the COPE is irrelevant, so logically it has to be b)   :'(

Always a mistake to credit the government with doing anything logical!

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Thanks, I'm just naturally suspicious,

p00hsticks said:

As your forecast should say immediately below the COPE figure 'This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.'

Which I took to mean what it said- the forecast isn't affected, but the COPE amount is paid by my personal pension, so the pension I get is the forecast less the COPE. (First time a slight ambiguity has worked out in my favour )

p00hsticks said:

(As an aside, you can only really deduct tax if you have other income that uses your personal allowance - the State Pension is taxable but paid gross and is less than the standard tax allowance). 

My personal pension just hits the threshold, which provides me an incentive not to do any paid work as 20% of my toil would be for The Government's benefit!

biscan25 said:

You'll receive £185.
The COPE is a measure of the "benefit" from your private scheme you receive as a result of being contracted out.
I guess you must have at least a couple of complete years pre 2016 where you were not contracted out?

I must have 10 or 11, hard to be sure as they don't make any distinction on the record.

Hopefully the state pension will cover the gas bill when I get it!

Albermarle

You mention 'personal pension' . Is this the pension that was funded by opting out of SERPS?

If so it will be a pot of money in a DC pension . In this case there is no fixed income, it depends on the size of the pot and how you choose to take it. (It may be a lot more or less than the COPE amount, as this was just an estimate 6 years ago)  In which case I do not understand this comment . 

My personal pension just hits the threshold, 

It sounds like a pension with a fixed income? Do you have the SERPS related personal pension and another pension as well. It is not very clear .

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Albermarle said:

You mention 'personal pension' . Is this the pension that was funded by opting out of SERPS?

If so it will be a pot of money in a DC pension . In this case there is no fixed income, it depends on the size of the pot and how you choose to take it. (It may be a lot more or less than the COPE amount, as this was just an estimate 6 years ago)  In which case I do not understand this comment . 

My personal pension just hits the threshold, 

It sounds like a pension with a fixed income? Do you have the SERPS related personal pension and another pension as well. It is not very clear .

I have a teachers pension, which started when I got to 60, the state pension doesn't start for years yet.  I managed to get enough service to make a reasonable pension, that just passes the income tax threshold so I pay tax on it.

When I worked part time HMRC wanted to split the tax allowance so I had two bizarre tax codes. I got them to put the entire allowance on the TP, and give me a zero code for any other work, as it made more sense to me.

I now understand that they will reduce my tax allowance by the amount of the state pension and not tax the state pension, so I will pay the same tax, just that it will hurt more as it will reduce the personal pension payout by 20% of my state pension.  I'd prefer the allowance on my TP, and zero on the state pension like before.

molerat

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Albermarle said:

You mention 'personal pension' . Is this the pension that was funded by opting out of SERPS?

If so it will be a pot of money in a DC pension . In this case there is no fixed income, it depends on the size of the pot and how you choose to take it. (It may be a lot more or less than the COPE amount, as this was just an estimate 6 years ago)  In which case I do not understand this comment . 

My personal pension just hits the threshold, 

It sounds like a pension with a fixed income? Do you have the SERPS related personal pension and another pension as well. It is not very clear .

I have a teachers pension, which started when I got to 60, the state pension doesn't start for years yet.  I managed to get enough service to make a reasonable pension, that just passes the income tax threshold so I pay tax on it.

When I worked part time HMRC wanted to split the tax allowance so I had two bizarre tax codes. I got them to put the entire allowance on the TP, and give me a zero code for any other work, as it made more sense to me.

I now understand that they will reduce my tax allowance by the amount of the state pension and not tax the state pension, so I will pay the same tax, just that it will hurt more as it will reduce the personal pension payout by 20% of my state pension.  I'd prefer the allowance on my TP, and zero on the state pension like before.

They generally only split codes if either income stream will not use the whole allowance, that is the only time mine have been split - I went from whole / BR to split and back to whole / BR. 

State pension cannot  be taxed at source so that idea is a non starter.

xylophone

I don't see the problem.

Your state pension will be paid without the deduction of tax.

The tax you are liable to pay will be deducted from the TPS pension.