State Pension & Historical Contracted out Period

Shaky1105

Hi all. I just checked my State Pension Forecast & it's reporting as being £233.65 pw. I can't seem to get my head around this as from the age of 16 in 1981 until 1993 I was contributing to a contracted-out pension scheme (BT) until I left their employment. Since then, I was paying full NI until December last year when I was made redundant. My NI record shows 43 full years but up until 1993, seeing as I was contracted-out wouldn't this mean that I still have to contribute 5 years to get the 35 years required for the maximum state pension ? Also, where does the forecasted figure come from as that is more than the maximum amount ? I'm completely lost on this and can't seem to find any calculators available online that would explain the weird figures.
Any help would be gratefully received as I am considering just doing some part-time work for the next few years until my state retirement age but don't want to shoot myself in the foot and do myself out of any full entitlements by not making the required amount of NI contributions.

Marcon

Shaky1105 said:

Hi all. I just checked my State Pension Forecast & it's reporting as being £233.65 pw. I can't seem to get my head around this as from the age of 16 in 1981 until 1993 I was contributing to a contracted-out pension scheme (BT) until I left their employment. Since then, I was paying full NI until December last year when I was made redundant. My NI record shows 43 full years but up until 1993, seeing as I was contracted-out wouldn't this mean that I still have to contribute 5 years to get the 35 years required for the maximum state pension ? Also, where does the forecasted figure come from as that is more than the maximum amount ? I'm completely lost on this and can't seem to find any calculators available online that would explain the weird figures.
Any help would be gratefully received as I am considering just doing some part-time work for the next few years until my state retirement age but don't want to shoot myself in the foot and do myself out of any full entitlements by not making the required amount of NI contributions.

Endless info already posted replying to those who are equally confused! See https://forums.moneysavingexpert.com/discussion/6445947/good-and-short-explanation-of-cope#latest and https://forums.moneysavingexpert.com/discussion/6452805/new-board-for-state-pension-top-up-future-pension-centre-voluntary-nics-questions#latest

Also likely to be useful, and mercifully shorter:

https://www.thisismoney.co.uk/money/pensions/article-9176435/How-state-pension-affected-contracted-out.html
https://www.thisismoney.co.uk/money/pensions/article-13248521/I-paid-NI-state-pension-explain.html

molerat

Does your forecast show that you were contracted with a click link to a COPE amount ?  That is the only thing that is important if you are worried that your forecast is wrong.

You are completely misunderstanding how contracting out affects your pension, it does not deduct years, even when contracted out you were earning years towards the basic pension, it was the additional pension you contracted out from.

xylophone

On 6/4/16, two calculations were done to establish your starting amount for NSP. Bear in mind that a "full" year can be contracted in  OR out.

You were always contributing to basic State Pension - you were contracted out of Additional State Pension (SERPS/S2P).

Your starting amount was the HIGHER of 


 (A) NI qualifying (full) years (max 30)/30 x Full Basic State Pension (£119.30) + (SERPS/S2P - Contracted Out Deduction)


 (B) {NIQY (max 35)/35 x Full NSP (£155.65)} - Contracted Out Pension Equivalent.


The COPE was used once only in the above calculation.

What is the COPE shown on your Forecast?


During the years 1981 -1993 you would not have accrued any SERPS.

However, it would appear from what you have said that you were "contracted in" from 1993 to 2016.

Therefore you accrued SERPS/S2P up to that point.

In your situation, (A) would have been higher than (B) so was your starting amount.

You had accrued a full basic state pension + around nineteen years of Additional State Pension.

It would appear that at 6/4/16, your full basic state pension plus your additional state pension (after taking account of your COD) was

higher than £155.65.

This gave you a Full NSP plus an excess over NSP (which is called the "Protected Payment").

From that point, although you continued to pay NI (as you were under SPA and earning the relevant amount), your contributions did

not (and will not should you start working again) improve your starting amount..

It has simply revalued since then under the *"triple lock" (the full NSP portion)/CPI (the protected payment).

* double lock 2022

Shaky1105

Marcon said:Endless info already posted replying to those who are equally confused! See https://forums.moneysavingexpert.com/discussion/6445947/good-and-short-explanation-of-cope#latest and https://forums.moneysavingexpert.com/discussion/6452805/new-board-for-state-pension-top-up-future-pension-centre-voluntary-nics-questions#latest

Also likely to be useful, and mercifully shorter:

https://www.thisismoney.co.uk/money/pensions/article-9176435/How-state-pension-affected-contracted-out.html
https://www.thisismoney.co.uk/money/pensions/article-13248521/I-paid-NI-state-pension-explain.html

Firstly, sorry for the ridiculously late reply ! I completely forgot I posted a Q here until I just recently posted a different Q re: tax on my work pension ! Anyway, thanks very much for the links, I'll have a gander at them later today, it's appreciated.

Shaky1105

molerat said:

Does your forecast show that you were contracted with a click link to a COPE amount ?  That is the only thing that is important if you are worried that your forecast is wrong.

You are completely misunderstanding how contracting out affects your pension, it does not deduct years, even when contracted out you were earning years towards the basic pension, it was the additional pension you contracted out from.

Same apology as to Marcon above for the late reply. My forecast doesn't show any reference at all to a COPE amount so there's nothing I can click on unfortunately. You are correct on my misunderstanding of the contracting-out procedure however, so thanks for putting me straight on that one. 👍

Shaky1105

xylophone said:

On 6/4/16, two calculations were done to establish your starting amount for NSP. Bear in mind that a "full" year can be contracted in  OR out.

You were always contributing to basic State Pension - you were contracted out of Additional State Pension (SERPS/S2P).

Your starting amount was the HIGHER of 


 (A) NI qualifying (full) years (max 30)/30 x Full Basic State Pension (£119.30) + (SERPS/S2P - Contracted Out Deduction)


 (B) {NIQY (max 35)/35 x Full NSP (£155.65)} - Contracted Out Pension Equivalent.


The COPE was used once only in the above calculation.

What is the COPE shown on your Forecast?


During the years 1981 -1993 you would not have accrued any SERPS.

However, it would appear from what you have said that you were "contracted in" from 1993 to 2016.

Therefore you accrued SERPS/S2P up to that point.

In your situation, (A) would have been higher than (B) so was your starting amount.

You had accrued a full basic state pension + around nineteen years of Additional State Pension.

It would appear that at 6/4/16, your full basic state pension plus your additional state pension (after taking account of your COD) was

higher than £155.65.

This gave you a Full NSP plus an excess over NSP (which is called the "Protected Payment").

From that point, although you continued to pay NI (as you were under SPA and earning the relevant amount), your contributions did

not (and will not should you start working again) improve your starting amount..

It has simply revalued since then under the *"triple lock" (the full NSP portion)/CPI (the protected payment).

* double lock 2022

Same apology as above for the late reply. Thank you for the incredibly detailed explanation. I almost managed to work out how to understand it myself a few weeks ago but then the dreaded brain-fog settled in and everything just went doo-lally in my head 😜. As I said to @molerat there isn't any reference to a COPE amount on my forecast so do you think it would be prudent to get in touch with the Pensions Service or is there no need ?

dunstonh

 there isn't any reference to a COPE amount on my forecast so do you think it would be prudent to get in touch with the Pensions Service or is there no need ?

COPE has been removed as it no longer served any purpose and was creating confusion.

wouldn't this mean that I still have to contribute 5 years to get the 35 years required for the maximum state pension ?

Where are you getting 35 years from?   35  years doesn't apply to you. it only applies to people who build up entitlement fully under the NSP.   Not the BSP/SERPs/S2P period.   Most are still finding circa 40 something years is still typical.

Also, where does the forecasted figure come from as that is more than the maximum amount ? 

Your contracted in years before that was abolished can increase it higher then the NSP.  Your contracted out years, reduce it.   So, depending on that balance, you could be higher or lower.  Plus, your best years can replace your worst years once you exceed qualification.

xylophone

You could ask what your COPE was if you are particularly concerned but you have already accrued a state pension in excess of the full amount.

Since 6/4/16,  that part of your pension that was equal to a full NSP has been revaluing under the triple (double) lock while the amount in

excess of a full NSP has been revaluing by CPI.

As far as is known at the moment,  this will continue to be the case.

FIREmenow

xylophone says:

You could ask what your COPE was if you are particularly concerned but you have already accrued a state pension in excess of the full amount.

If you really want to know, when you are logged into your state pension forecast, you should see your COPE at this link: https://www.tax.service.gov.uk/check-your-state-pension/account/cope

If the link doesn't work r first time, double check you are logged in, and then click it again.

As said, it doesn't really matter as you definitely have (more than) enough years.

pinnks

FIREmenow said:

xylophone says:

You could ask what your COPE was if you are particularly concerned but you have already accrued a state pension in excess of the full amount.

If you really want to know, when you are logged into your state pension forecast, you should see your COPE at this link: https://www.tax.service.gov.uk/check-your-state-pension/account/cope

If the link doesn't work r first time, double check you are logged in, and then click it again.

As said, it doesn't really matter as you definitely have (more than) enough years.

Thanks for that.  Since they removed access to COPE I have been trying to find a way to see it again.  If you asked me, I would say I tried that link but it didn't work, but I have just tried again and, yey, I see my COPE again.  Who know what I clicked on previously, lol