Contracted out National Insurance Contributions

Chrisbdh

I enquired why I was receiving a reduced state pension and was informed that it was because I was contracted-out of the state scheme for a period.  I have 46 State Pension qualifying years however, apparently for 14 of those years I was contracted-out and was totally unaware. To get the full basic State Pension you need a total of 30 qualifying years of National Insurance contribution however, if you contracted-out you require a total of 35 qualifying years.  This is really unfair because 14 years private pension is a pittance, thus working for local government for 14 years, I am penalised. Is there any way around this.

eastcorkram

Not sure how you're penalised. The state pension you're actually getting, plus your local government pension, added together is surely more than the new state pension.

Ayr_Rage

When did you start receiving the state pension?

The 30/35 qualifying years are not set in stone, you may need more or less depending on your age.

I am 66 and needed over 48 years to get the full new state pension due to being contracted out.

mebu60

You also paid less NI when you were contracted out. I was 5 years over on the old system then recalculated on the new system to be 6 years short. I made voluntary contributions for those years. If I make it to 71, and I'm pretty close now, I will be quids in on that deal. 

Hoenir

Chrisbdh said:

thus working for local government for 14 years, I am penalised. 

Back in the day you paid a lower rate of employees national insurance on your earnings and received a far better rate of pension accrual than the private sector. In no way were you penalised. 

Silvertabby

Sigh.  Here we go again.  I have the maximum possible amount of  contracted out service (38 years 1978 to 2016) due to a combination of my RAF and LGPS pensions.

In no way do I consider myself to be 'penalised'.  On the contrary, you (depending on your age), me and many like us are the winners under the the new pension scheme.  Not only did we pay reduced NI during our contracted out service  (which resulted in the equivalent of the SERPS/SP2 that we hadn't paid for being included with our contracted out occupational pensions) we have enough time between 2016 and SPA to be able to add to what would have been our basic State pension under the old scheme. 

Two things to note:

1.  The new single tier pension is not, in any shape or form, the equivalent of the old basic State pension.  The two schemes are apples and oranges.

2.  Just because your State pension is less than than your mate's State pension doesn't mean that you have been diddled.  It just means that you had different entitlements.  

molerat

When did you reach state retirement and have you any unfilled NI years 2019-20 and later ?

Marcon

Chrisbdh said:

I enquired why I was receiving a reduced state pension and was informed that it was because I was contracted-out of the state scheme for a period.  I have 46 State Pension qualifying years however, apparently for 14 of those years I was contracted-out and was totally unaware. 

So you didn't read any of the literature given to you when you joined the scheme, or your contract of emplyment? The latter would have included this information (mandatory to do so), because it was technically your employment which was contracted out, and the contracting out certificate was in the employer's name - thus giving them authority to let you have reduced employee NI payments deducted from your pay each month.

Chrisbdh said:

This is really unfair because 14 years private pension is a pittance, thus working for local government for 14 years, I am penalised. Is there any way around this.

You aren't being penalised, so there's nothing to find a way around.

p00hsticks

Chrisbdh said:

. To get the full basic State Pension you need a total of 30 qualifying years of National Insurance contribution however, if you contracted-out you require a total of 35 qualifying years. 

Both of those statements are inaccurate. 

If you reached state Pension age prior to April 6th 2010, you would have needed 44 NI years for a full basic State Pension (currently £176.45) if male, but only 39 if female. 

If you reached State Pension Age between April 6th 2010 and April 5th 2016 you would have needed 30 years NI for a full basic State Pension.

If you reach State Pension age after April 6th 2016 but were born last century, you'll fall under transitional rules and will need anything between (anecdotely) around 28 to 49 years to qualify for the full higher new State Pension (currently £230.25) although those without NI credits for several years after that date (either by reaching SPA soon after or by not earning them through either employment, benefit credits or voluntary contributions) may not be able to achieve that full figure. The number of years required will vary from individual to individual depending on their specific circumstances, including whether they were contracted in or out for periods prior to 2016. 

If you were born this century and so your NI record starts after 6th April 2016, then under current legislation you will qualify for a full new State Pension once you have 35 NI years.  

QrizB

I look forward to the OP providing the additional information already requested.

katejo

p00hsticks said:

Chrisbdh said:

. To get the full basic State Pension you need a total of 30 qualifying years of National Insurance contribution however, if you contracted-out you require a total of 35 qualifying years. 

Both of those statements are inaccurate. 

If you reached state Pension age prior to April 6th 2010, you would have needed 44 NI years for a full basic State Pension (currently £176.45) if male, but only 39 if female. 

If you reached State Pension Age between April 6th 2010 and April 5th 2016 you would have needed 30 years NI for a full basic State Pension.

If you reach State Pension age after April 6th 2016 but were born last century, you'll fall under transitional rules and will need anything between (anecdotely) around 28 to 49 years to qualify for the full higher new State Pension (currently £230.25) although those without NI credits for several years after that date (either by reaching SPA soon after or by not earning them through either employment, benefit credits or voluntary contributions) may not be able to achieve that full figure. The number of years required will vary from individual to individual depending on their specific circumstances, including whether they were contracted in or out for periods prior to 2016. 

If you were born this century and so your NI record starts after 6th April 2016, then under current legislation you will qualify for a full new State Pension once you have 35 NI years.  

I fall into the category of being born last century and reaching state pension age post 2016. My state pension statement, dated 2024 (when I had paid in for 34 years),  says that I can't increase the value any further but also says that I did have some contracted out SERPS. I think this means that I don't need to do anything but a colleague (same age) disagrees with me and thinks that the £230.25 is what we would get if we hadn't had any payments contracted out. Am I right?