Contracted out

ericthesanddune

Can someone please explain why a company pension scheme has contracted out and non contracted out with regards to NI?.. it appears after over 45 years of working and paying NI (and apparently not the full amount for 26 of those years due to the contracted out bit) I don’t get a full state pension 

mebu60

You were contracted out of the Additional State Pension / SERPS. You therefore paid less NI. You also had a workplace pension.

When the current State Pension scheme arrived in 2016 a baseline calculation was made of where you were in the new system based on previous NI contributions so those who were contracted out previously were reduced proportionately. You would not get less than you would have got under the old system, in many cases it was still more. You will have been paying full standard NI since 2016. 

DullGreyGuy

You were given a choice between paying extra NI for the Additional State Pension or paying reduced NI by contracting out. The delta between the two NI numbers typically would be added to your non-state pension 

uknick

You might want to ask to move this to the pension forum where you'll get copious amounts of answers on the subject of contracting out pensions and the new state pension.

One thing I will say is that you are no worse off on the new scheme than you were on the old.  

molerat

ericthesanddune said:

Can someone please explain why a company pension scheme has contracted out and non contracted out with regards to NI?.. it appears after over 45 years of working and paying NI (and apparently not the full amount for 26 of those years due to the contracted out bit) I don’t get a full state pension 

Looking at your other posts you reached state retirement in Sept 22.  You are a winner as far as the new pension is concerned as you were able to top up your old scheme state pension with post 2016 contributions.  Under the old scheme your pension would have stalled at 30 years with only any additional pension, the one you were contracted out of, being added to the basic amount.  If you do have any gaps in your record post 2016 then you could fill them to increase your pension.  I managed to add an additional 3 years onto what I was resigned to receiving after retiring early pre 2016, still not able to reach the full amount but definitely better off than I would have been.  Everyone with 30 or more years pre 2016 and retiring after April 2025 with a full post 2016 record will get a full new pension.

xylophone

45 qualifying years at 5/4/22?

If your scheme was DB contracted out,  it ceased being so at 6/4/16.

At 6/4/16, your "starting amount" for NSP was calculated as the HIGHER of

Old Rules

NIQY/30 x Full Basic SP + (SERPS/S2P - Deduction for Contracting Out).

New Rules

(NIQY x  Full NSP) - Contracted Out Pension Equivalent.

Your starting amount was less than a full NSP - contributions/credits from 6/4/16 to 5/4/22 would have improved your Starting Amount up to (but not in excess of) a full NSP.

 Assuming that you had seven full QY from 2016/17 onwards ,It would appear that your "COD" was high enough that it could not be fully "bought out" by your contributions in those years.