Contracted out of SERPS but still in line to get full state pension

DRS1

drcarrera said:

molerat said:

Everyone retiring from April 2025 with a full NI history will receive the full new pension even if contracted out, simple maths.

Yes but I still don't really understand why the years I was contracted out still count as "full". Or is it that I paid above a certain amount if NI as I was earning quite well so they count anyway?

Looking at it another way, if I hadn't contracted out and was entitled to the same amount of pension as someone who had contracted out and received thousands into their private pension as well I might consider that a tad unfair (although I'm not complaining!).

I don't think those two people would actually receive the same SP but I may be wrong.  The additional pension generated pre 2016 by someone who was contracted in does not equal the protected pension post 2016 but I think it makes it much more likely you would get one.

drcarrera

pinnks said:

If you were contracted out it is common that your starting amount for the new state pension is equal to the maximum old basic pension, which is currently £169.50 per week.  If you have then paid, or been credited with NI for 9 full years 2016/17 to 2024/25, or later years too, then you will receive the new maximum. 

Thanks. The first sentence makes perfect sense. However, I've only got four years more full years since 16/17 but it still says I'm entitled to the full amount.  Or is the Government forecast assuming I'll pay further years between now and retirement? That's not how it reads.

p00hsticks

drcarrera said:

molerat said:

Everyone retiring from April 2025 with a full NI history will receive the full new pension even if contracted out, simple maths.

Yes but I still don't really understand why the years I was contracted out still count as "full". Or is it that I paid above a certain amount if NI as I was earning quite well so they count anyway?

Looking at it another way, if I hadn't contracted out and was entitled to the same amount of pension as someone who had contracted out and received thousands into their private pension as well I might consider that a tad unfair (although I'm not complaining!).

For state pension purposes an NI year counts as 'full' whether you were contracted in, contracted out or a mixture of the two during the year, or didn't pay NI at all but either earned over the Lower Earnings Limit or were given credits e.g. through claiming certain benefits such as Child Benefit. (this of course assumes that you paid or got credits for each week of the year in question. 

As others have pointed out, the contracting in and out referred to SERPS/S2P which sat on top of the old style 'basic' pension. 

molerat

drcarrera said:

pinnks said:

If you were contracted out it is common that your starting amount for the new state pension is equal to the maximum old basic pension, which is currently £169.50 per week.  If you have then paid, or been credited with NI for 9 full years 2016/17 to 2024/25, or later years too, then you will receive the new maximum. 

Thanks. The first sentence makes perfect sense. However, I've only got four years more full years since 16/17 but it still says I'm entitled to the full amount.  Or is the Government forecast assuming I'll pay further years between now and retirement? That's not how it reads.

Your forecast should state if you need to contribute more years, you will have more than the single figure on the forecast, but as your contracted out period was not that great you would have earned some additional pension meaning those 4 years could have been enough.  You should also have "You've been in a contracted-out pension scheme" at the bottom of the forecast so if you click https://www.tax.service.gov.uk/check-your-state-pension/account/cope whilst logged into your tax account it will show you how much your 2016 new scheme amount was reduced due to contracting out.

drcarrera

molerat said:

drcarrera said:

pinnks said:

If you were contracted out it is common that your starting amount for the new state pension is equal to the maximum old basic pension, which is currently £169.50 per week.  If you have then paid, or been credited with NI for 9 full years 2016/17 to 2024/25, or later years too, then you will receive the new maximum. 

Thanks. The first sentence makes perfect sense. However, I've only got four years more full years since 16/17 but it still says I'm entitled to the full amount.  Or is the Government forecast assuming I'll pay further years between now and retirement? That's not how it reads.

Your forecast should state if you need to contribute more years, you will have more than the single figure on the forecast, but as your contracted out period was not that great you would have earned some additional pension meaning those 4 years could have been enough.  You should also have "You've been in a contracted-out pension scheme" at the bottom of the forecast so if you click https://www.tax.service.gov.uk/check-your-state-pension/account/cope whilst logged into your tax account it will show you how much your 2016 new scheme amount was reduced due to contracting out.

My "COPE" estimate is around £25 p.w . I had 36 years "Full amount" and have just paid a small amount to make one more year "full" so I now have 37 years.  I was contracted out of SERPS for around 10 years. I'll reach state pension age in 5 1/2 years.

So perhaps, as you say,  the (now) four full years since 16/17 are enough to give me a full state pension. 

Silvertabby

molerat said:

Everyone retiring from April 2025 with a full NI history will receive the full new pension even if contracted out, simple maths.

Absolutely.  But we'll still be getting enquiries from those  who retired at 60 (or earlier) with 35 + full financial years of NI contributions for some time yet.

Y_am_I_Here

As someone in a very similar position to the OP, I am also finding it very difficult to understand whether I NEED to make any additional NI contributions or not. My forecast says I will get the "Full" state pension and I can not increase it, but I, like the OP, I was Contracted Out for a number of years.
I'm currently not working (or claiming any benefits)
There is a worry that I'm making a big mistake by not paying additional NI contributions 

molerat

If you need to make further contributions your forecast will clearly state it, there will be more than one amount shown. There are some good screenshots in another thread here of full and not full forecasts https://forums.moneysavingexpert.com/discussion/6586734/state-pension-forecast-anomaly

Moonwolf

It is worth noting that the change, like all such changes has winners and losers.

As I am old enough and was contracted out I am a winner.  I get credits for the years I was 16 and 17 even though I was at school and I have some contracted out element in my pension. 

As I understand it, if I had remained contracted in and my starting amount in 2016 had already been enough I would have just paid NI for longer without accruing more pension. So technically with the pension accrued from contracting out I might get more pension that someone who earned the same as me even though I paid less NI.

On the other hand, if the person contracting in had a starting amount higher in 2016 they could have had more than the new state pension and be better off than a capped DB in the long run.

Linton

drcarrera said:

pinnks said:

If you were contracted out it is common that your starting amount for the new state pension is equal to the maximum old basic pension, which is currently £169.50 per week.  If you have then paid, or been credited with NI for 9 full years 2016/17 to 2024/25, or later years too, then you will receive the new maximum. 

Thanks. The first sentence makes perfect sense. However, I've only got four years more full years since 16/17 but it still says I'm entitled to the full amount.  Or is the Government forecast assuming I'll pay further years between now and retirement? That's not how it reads.

 From what you say you were contracted-in for longer than you were contracted out.  The key factor is that when you were contracted-in pre-2016 you would have been accruing SP leading to a much higher amount than the basic figure. That extra could easily outweigh the reduced SP from when you were contracted out.

Contracted-in/out refers to what was originally intended to be a state-run DB pension when the majority of employees did not receive any employer's pension. Contracted-out came from the principle that those people who did get an employers pension and their employer would not want to pay extra NI for yet another DB pension.