State pension forecast question re contracting out

Pat38493

My state pension forecast is £185.15 per week in today's terms which I understand is the maximum you can get (payable 2036)?

However if I click into the "you were contracted out screen", it talks about how my "COPE Estimate" is £42.56 per week and that this is paid as part of my other pension schemes and not by the government.

What does this actually mean in plain English?  Does it mean that I would actually only get a pension of £142.59 per week and the rest of my "theoretical state pension" will be part of my employer pension payments?

I had always assumed that I would get the £185.15 per week but after clicking into this screen I am now confused.

I seem to remember reading something else that implied that if you are retiring after 2016, this contracting out stuff makes no difference, and I will still get the full state pension as the actual payment - is that right or wrong?

My NI payments screen shows 36 years of "full contributions", but as far as I can tell, the term "full contributions" does not distinguish between contracted out or not pre-2016.

calcotti

You need to look at the detail on the pension forecast. It should say what entitlement you have based on your contributions to April 2022 and tell you how many years you still need to contribute to reach the maximum amount.

For everyone who started work before 2016 the number of years of NI needed to get maximum SP depends on work history and how much you were contracted out. The contracting out impacts the 2016 starting amount calculation.
See
https://www.gov.uk/new-state-pension/how-its-calculated

Pat38493

calcotti said:

You need to look at the detail on the pension forecast. It should say what entitlement you have based on your contributions to April 2022 and tell you how many years you still need to contribute to reach the maximum amount.

For everyone who started work before 2016 the number of years of NI needed to get maximum SP depends on work history and how much you were contracted out. The contracting out impacts the 2016 starting amount calculation.
See
https://www.gov.uk/new-state-pension/how-its-calculated

Well it says

You can get your State Pension on 10 January 2036

Your forecast is £185.15 a week,

£805.07 a month, £9,660.86 a year

£185.15 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 10 January 2036 as they fund other state benefits and the NHS.

In the NI screen it says

You have:

• 36 years of full contributions
• 13 years to contribute before 5 April 2035
• 2 years when you did not contribute enough

In the COPE screen it says

You were contracted out

In the past you’ve been ‘contracted out’ of the additional State Pension.

When you were contracted out:

• you and your employers paid lower rate National Insurance contributions, or
• some of your National Insurance contributions were paid into another pension scheme, such as a personal or stakeholder pension

The amount of additional State Pension you would have been paid if you had not been contracted out is known as the Contracted Out Pension Equivalent (COPE).

Contracted Out Pension Equivalent (COPE)

Your COPE estimate is £42.56 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.

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

The total amount of pension paid by your workplace or personal pension schemes will depend on the scheme and on any investment choices.

Find out more about COPE and contracting out (opens in new tab)

So to be clear, when I start claiming my state pension, will the actual state pension payment that lands in my bank account from UKGov be £185.15 per week or will it be £185-£42.56 per week?  Based on what it says on the COPE screen it could be read both ways.

SandyN21

If you scroll further down the forecast page there's a green box that gives an estimate of your pension based on your NI contributions.

I'm actually due mine next year

Pat38493

SandyN21 said:

If you scroll further down the forecast page there's a green box that gives an estimate of your pension based on your NI contributions.

I'm actually due mine next year

Hi - mine does not have the second green box - it just says "Your pension is the maximum you can get and cannot be increased"

However there is another screen that you can click into that says that my COPE Deduction is £42.54 per week.

So I'm still wondering whether I have to deduct that amount from the green box or not?

calcotti

No you don’t. You have reached your maximum entitlement.

Pat38493

calcotti said:

No you don’t. You have reached your maximum entitlement.

OK so I would get paid the full amount in the green box then.

I'm wondering what the £42.56 COPE amount means then?

Is this perhaps because I have worked enough years since 2016 to already cancel out the historic effect of being contracted out?

squirrelpie

You will get the full £185.15 from the government. You will get at least an additional £42.54 from your existing private pensions. Hopefully you will get a lot more, but the government only knows enough to say you will get at least an additional £42.54

molerat

Contracted Out Pension Equivalent (COPE)

Your COPE estimate is £42.56 a week

This will not affect your State Pension forecast.

It says it all in the text

Pat38493

molerat said:

Contracted Out Pension Equivalent (COPE)

Your COPE estimate is £42.56 a week

This will not affect your State Pension forecast.

It says it all in the text

Well sort of - but I know this is a bit nitpicky but it says, "This will not affect your pension forecast" rather than "This will not affect the amount of state pension that you get paid".   

calcotti

Please read this
https://www.gov.uk/new-state-pension/how-its-calculated