LGPS and contracting out - How to calculate

pandora205

Prompted by discussions regarding the closing of opportunities to buy back state pension, I revisited my entitlement.  I am already drawing this (now four years in - I deferred for one year), in addition to LGPS.  I have 42+ years contributions in my NI when I retired but do not receive the full state pension.

I am aware that having contributed to Teachers Pension/LGPS for these years I was 'contracted out' for quite a few years.  My reduction to SP (from April 2025) is around £30 per week.  Does this seem correct?  If not, is there a way I can calculate what it should be and what I should do.

@Silvertabby, I know you are the LGPS expert here, so wondered if you (or anyone else) could help, please?

Thanks 

molerat

Your pension shortfall is not directly related to your contracted out deduction (COPE) amount so there is no way of telling unless you got a forecast before you retired showing the COPE.  You could ask for a full breakdown of your NI record and contracted out calculations.  It would take several months and would be many pages long with almost rocket scientist calculations shown.  The main thing for you to consider is do you have any gaps showing on your NI record from years 2016-17 and later.  These can be filled and would give you £6.32 per week each but 18-19 and earlier cease to be available from April.

p00hsticks

Did you get a State Pension Forecast at any point before you reached SPA ? 

The figures you need for an accurate calculation from scratch are the COPE (Contracted Out Pension Equivalent) amount that used to be shown or linked to on the forecast, and a figure for any SERPS /S2P you may have accrued.

But the values of these can be (at least roughly) extrapolated back from the amount of pension that you are actually receiving and your NI record. @molerat is the expert in this area !

Can you let us know

• How many NI years you have full prior to April 2016 
• How many NI years you have full after April 2016 
• The tax year in which you reached State Pension Age
• How much State Pension you are receiving

and also which (if any) post-2016 years you have that you can fill 

xylophone

Your "starting amount" for NSP was calculated at 6/4/16 as the higher of 

Old Rules

NIQY/30 (max) x £119.30 (Full Basic) + (Additional State Pension - Deduction for Contracting Out)

New Rules

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

Given that you had 42 QY in 2020 you had more than 35 QY at 6/4/2016. 

Your "starting amount" was less than a full NSP but could only be improved up to (but not in excess of) a full NSP by full years from

6/4/2016 to the last full year before you reached SPA.

Silvertabby

This sounds entirely plausible.  In my own case, having been contracted out due to my RAF and Local Government service, I needed 48 NI years to rack up the full nSP.  44 from working, 4 from paying voluntary Class 3s.

As molerat and p00hsticks have said, only paying for any post 2016 gaps will actually increase your State pension, so the first question to address is....do you have any gaps between 2016/17 and your last full financial year before SPA?

If you are able to plug any gaps then you, me, and many like us are the winners under the new pension scheme.  Had it not changed, then we would have received little more than the old basic State pension, with no way to increase it.  Instead, despite our years of paying reduced NI (in favour of our occupational pensions) most of us are able to increase our State pensions, either by working between 2016 and SPA or by buying voluntary Class 3s.

pandora205

Thanks everyone for your helpful comments. 

I will dig out all my documentation to answer the specifics but definitely no gaps at all in NI since age 21 to retirement at 65+ (so nothing to plug).  I did get pension forecasts (I don't recall COPE so will look for that).  I do remember a statement to the effect that the amount could not be increased.

I'll post details once I've found them all in my wonderful filing system.

molerat

The only contracted out people guaranteed to get a full pension are those retiring from this April.  There are lots of us out there who are short of the full amount and the closer to 2016 you reached retirement the larger the shortfall would likely be.  You are though no worse off than you would have been under the old rules and in fact likely slightly better off due to the uprating of the whole pension by the triple lock rather than different rates for basic and additional pension.

Further to my comment about the COPE amount not being directly related to the shortfall.  In my case any COPE above £19.50 would have put my starting amount under the old rules.  It is in fact £75 so just being contracted out has a bigger effect than the COPE itself - although there can also be a deduction on the old pension amount.

If you post up those figures asked earlier it is pretty straightforward to tell you how you got where you are.

pandora205

Here is a bit more information from my records.

My SP from April 2025  £189.64 + £11.07 (extra SP) = £200.71
State pension due from 6.3.19 but I deferred 12 months.
At the time of my last forecast (SP summary dated 20.10.17) it said '£131.41 is the most you can get'
NI contributions 46 years, 43 prior to April 2016, 3 post
Retired from employment 31.8.19

I couldn't see a COPE figure on any documents.

I don't think I was/am able to top up SP at all.

Just checked via www.gov.uk/check-state-pension and the figures for NI are still the same, i.e. 46 years with no gaps.

molerat

You can't have 3 post 2016 years, you reached SPA in March 2019 so could only have 2016-17 and 2017-18.  It took me a while to figure out why my spreadsheet wouldn't give a sensible answer as £131.41 uprated correctly to £189.64 for 25-26.

Anyway ......

At April 2016 you had an old system amount of £119.34, that is only 4p of additional pension due to a long contracted out history.  Your new system calculation would only have needed a COPE of £36.32 to be lower than the old pension and make it unviable (£155.65 - £36.32 = £119.33), it will have been way in excess of that.  You would have needed 9 years post 2016 to have reached the full amount so unfortunately could not make full use of the new pension.  But, those 2 extra years are more than you would have got if the old system had continued.

pandora205

Thank you @molerat, that makes sense.  Thank you for the calculations.  Of course, you are correct about the three years - I was thinking of my retirement date rather than state pension age.  I don't think I would have wanted to work those extra years - I'd only be retiring now rather than in 2019.  

I was really just checking that I hadn't missed something re. buying back years or that there had been a miscalculation.