Contracted out Deductions from years ago.

Embroidergal

Hi have recently been checking out why my  new state pension is so low after Martins recent mention about Home responsibilities Protection. There are two years 1978-1980 that I didn't receive any credits and fingers crossed that should make a difference with a possible back dated refund. Just waiting to hear how this impacts, however, when checked on my Gateway and after contacting HMRC there are quite a few years when I am showing with Contracted out Deductions.
This puzzled me somewhat !!! My last employer was South Yorkshire Police and HMRC advised that would be the reason. When I joined SYP I put two earlier pensions into the latter one and that is the reason that my previous employment is showing C.O.D. HMRC gave me the dates and my first employer was British Gas and during the period concerned 1988-1994. After ringing South Yorkshire Pensions Authority they advised me that as a matter of course any previous pensions were made C.O.D. without my permission. 
I contacted BG pensions and during this period my contributions were not contracted out and I paid category D contributions, they have now given me written confirmation.  Surely I need these years putting back on my N I record but I am not sure who I should contact, is it HMRC, DWP or South Yorks Pension Authority. I am at a loss lol Thanks any advice will be great.

Dazed_and_C0nfused

Category D is contracted out!

Why would you want to give up your valuable defined benefit pensions 😳

Would you be happy to pay the extra NI you avoided paying whilst contracted out?

I really think you would be best served by reading up in more detail on the new State Pension.  An awful lot of people previously contracted out are winners under the new system.

dunstonh

My last employer was South Yorkshire Police 

That would be a contracted out scheme..

 HMRC gave me the dates and my first employer was British Gas and during the period concerned 1988-1994.

The old BG defined benefit pension would have been contracted out.

I contacted BG pensions and during this period my contributions were not contracted out and I paid category D contributions, they have now given me written confirmation

Cat D is contracted out.  

Embroidergal

Cheers for this information, the conversation I had with the BG pensions chap said quite clearly 'you paid full cat D contributions' and were not contracted out !!! You would have thought he would have known what he was talking about. Made me look a right fool LOL

xylophone

You seem to be very confused about contracting out.

You mention two previous pensions transferred into SYP (itself a contracted out scheme and one which would have remained contracted out until 5/4/16).

You have been  advised that one of the pensions transferred in was one with British Gas (which at the period you were a member (1988-94) was a contracted out scheme).

Therefore you transferred contracted out to contracted out.

During the period you were with BG you were accruing a Guaranteed Minimum Pension.

If you joined SYP  Scheme before 6/4/97 you were also accruing a GMP.

The State Earnings Related Pension Scheme was introduced in 1978. 


 Employers/employees paid additional NI contributions to build up a pension in addition to the basic state pension.

However, in return for guaranteeing a pension that was at least as great as would be provided by SERPS, employers/employees could contract out of the SERPS scheme and pay lower NI contributions.

Part of your occupational pension from BG/SYP was the Guaranteed Minimum Pension.



The GMP scheme ended in 1997.

SERPS was replaced by S2P in 2002.


If you were a member of the Scheme on or post 6/4/97 and up to 5/4/16, you were accruing S32 (9B) rights as a result of being in a contracted out salary related scheme.  This was in compliance with the reference scheme test, which replaced   guaranteed minimum pensions on 6 April 1997.  These rights were also known as Post-1997 contracted-out salary-related rights or Post-1997 COSR rights.

SEE

https://techzone.abrdn.com/public/pensions/Tech-guide-guaranteed-min-pen#:~:text=Guaranteed minimum pension, commonly known,1978 and 5 April 1997.

The effect of having GMP/ Post 97 COSR rights on the calculation of your "starting (foundation) amount" for NSP is set out here.


https://assets.publishing.service.gov.uk/media/5a7c2e95e5274a25a9140fdc/single-tier-valuation-contracting-out.pdf


In short, at 6/4/16, two calculations were done to establish your SA - it was the higher of

Old Rules

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

New Rules

(NIQY/35 x Full NSP) - Contracted Out Pension Equivalent (referred to in link as Rebate Derived Amount).

If your SA was less than a full NSP, it was possible, (depending on circumstances) to improve it up to (but not in excess of) a full NSP by further contributions or credits.

 For example, if you were under SPA at 6/4/16 and still paying or being credited with NI up to SPA, this would improve your SA. 

Below produced for 2019/20 might be of interest.

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/gwymg-1b-topping-up-state-pension-2019-interactive.pdf

molerat

Filling those 2 gaps may not make any difference to your pension.  Fairly easy to check with a few pieces of anonymous information.

Current weekly £££.pp pension amount
Number of pre April 2016 NI years full
Number of post April 2016 NI years full

There may be something you can do about your pension shortfall though, the following would find out

Tax year you reached state retirement
Any years that show not full (and prices to fill)

dunstonh

Embroidergal said:

Cheers for this information, the conversation I had with the BG pensions chap said quite clearly 'you paid full cat D contributions' and were not contracted out !!! You would have thought he would have known what he was talking about. Made me look a right fool LOL

Just to provide further info.  Category D, E, L, N or O was contracted out.  Category A was contracted in.

Marcon

Embroidergal said:

After ringing South Yorkshire Pensions Authority they advised me that as a matter of course any previous pensions were made C.O.D. without my permission. 

You gave 'permission' by joining the scheme.

Either you:

1. joined the scheme and had the benefit of paying lower NI contributions (which increased your take home pay) and building up a hugely better pension than the State Additional Pension given up during that period; or
2. you opted out (only possible from 1988 on), paid higher NI and build up a modest State Additional Pension instead of the significant scheme benefits.

Probably not one to feel too miffed about!