Contracting Out and voluntary contributions

veryconfused123

I am confused about an issue to do with voluntary contributions and the process known as “contracting out”.

I was a public employee and (in common with many public sector workers) my occupational pension was, for some years, contracted out. I have the full 35 years of national insurance contributions which would normally qualify me for a full state pension, but, because of contracting out, my pension will be reduced to below the full level of the state pension.

I am a couple of years away from receiving my state pension and I have the money to make further voluntary contributions. I also have missing recent years (I have been retired for several years) which I can “fill”.

My question is this. If I pay some years of voluntary contributions will this act to increase my pension, and, in effect, reduce or get rid of the contracting out deduction, or will these voluntary payments merely provoke the powers that be to say I had the full 35 years and I cannot benefit from voluntarily paying for more years. What I want to do, if it is possible, is to build up to the full state pension by paying these voluntary contributions, and, in the process, getting rid of the contracting out reduction.

I have looked at various apparently reputable websites on the Internet and they give conflicting advice on this point. Some websites say one can, in effect, buy out the contracting out reduction and others say one cannot. Without access to a law library I cannot see how I can get at the relevant regulations and work out what the regulatory position is. I am afraid I don’t trust the Pension Service to give appropriate or correct advice/information.

Accordingly, what I would most like to do is to hear from someone who was in this situation (and it is a situation which must affect thousands of former public employees) and who went on to make voluntary contributions which took them over 35 years of contributions, and then to know whether they benefited by the reduction of the contracting out reduction, or not, as a result of those voluntary contributions.

I suppose, alternatively, it would be useful to hear from someone who had in fact made more than 35 years of contributions while in work and did not suffer a contracting out reduction, even though they had been contracted out, because they had made the additional years of contributions which, in effect, bought out the contracting out reduction.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6665518/contracting-out-and-voluntary-contributions

You have misunderstood quite a bit of this.

Having 35 years is of absolutely no relevance to you whatsoever, those rules apply to people starting to get qualifying years from April 2016 onwards.

You fall under transitional rules where you might need anywhere from say 28/29 years to over 50.

Your State Pension is not in any way being reduced. You are almost certainly a big winner under the new system, having paid a reduced level of National Insurance for many years and now having the chance to reach the standard new State Pension despite paying less NI.

What is key here is that you understand the benefits buying extra years will bring. This can range from adding £6.89/week to your pension to just £0.01p/week.

So, the key question what have you actually accrued so far?

Ayr_Rage

Forget 35 years, that only applies to those born this century.

The pension website DOES give you the number of years required to attain the full state pension and DOES take into account periods when you were contracted out, you just have to buy the payable years but not all may be available depending on your age.

Trust the system, they don't give advice, just the facts.

Born in 1959, I needed over 47 years to get the full NSP.

DRS1

There is a whole sub board dedicated to this topic. You may want to have a read.

Topping up your state pension — MoneySavingExpert Forum

Contracting out features a lot. But it is largely a red herring. Just look at your forecast and any missing years. If you have a lot of holes in your record you may be a bit late to fill them all. And if you are approaching SPA then it may be a good idea to fill any available holes (that you need) before you get there. But of course you may not need any (and if you have been working for all the last 6 years there may not be any holes to fill).

For what it is worth I was contracted out and have a COD. I wasn't a public sector worker but plenty of private sector workers have been contracted out too. I had less than 35 years full NICs and I did top up to bring my state pension up to about £3 shy of the maximum new state pension. Maybe I should fill the last year to close the gap but I haven't done so yet.