State Pension Forecast, Qualifying Years & Contracting Out
Discussion
I tripped over an old Section 32 pension while going through some files & it started me thinking about State Pensions & contracting out so I went onto the .GOV website to get a State Pension forecast & now I'm utterly confused.
There in stonking big numbers it says £168.60, which I think is the maximum, so all is good. But it's not what I'm actually in line to get as just below it says I'm missing five years NI contributions so the 'estimate' (not a forecast) is only £145.77. How can a forecast not be relative to the current status? I could forecast I'll be worth £100m if I win the lottery but it doesn't mean anything.
Then it told me I'd been contracted out, which I knew, & pointed me to another page which mentioned something called COPE, estimated at £39.08, but says it doesn't affect my forecast. So nowhere does it say whether I'm going to get paid £168.60 or £168.60 minus £39.08. It's a substantial difference if you're having to plan living on it. I guess they think my S32 policy is going to pay out & assume it will be £39.08.
Next I looked at my NI contribution record:
39 years. Surely that's enough for a full pension? When I looked at this page:
https://www.gov.uk/government/publications/your-ne...
The only information I can find is that anyone with no NI record before 2016 needs 35 years, but no mention of how many years the majority of the population (those with NI records before 2016) needs.
I can't even get the number of years on the site to add up - they say 39 but I counted up all the years listed on the website & I only make it 38. They've also given me qualifying years when I was at university & I don't recall working.
I called the helpline but after 20 minutes on hold I gave up. I'd cheerfully strangle the morons who designed the website without a print function as well. And don't get me started on the Government Gateway page which knows my name, address, email & phone number but crashes out saying it 'can't veriify my identity'.
Executive summary/TL:DR:
Is the COPE amount taken off what I can expect to receive?
Isn't 39 years NI contributions enough?
When are they likely to finish checking if I paid enough NI in 2015/16?
How the hell do the majority of the retiring population cope with this nonsense?
There in stonking big numbers it says £168.60, which I think is the maximum, so all is good. But it's not what I'm actually in line to get as just below it says I'm missing five years NI contributions so the 'estimate' (not a forecast) is only £145.77. How can a forecast not be relative to the current status? I could forecast I'll be worth £100m if I win the lottery but it doesn't mean anything.
Then it told me I'd been contracted out, which I knew, & pointed me to another page which mentioned something called COPE, estimated at £39.08, but says it doesn't affect my forecast. So nowhere does it say whether I'm going to get paid £168.60 or £168.60 minus £39.08. It's a substantial difference if you're having to plan living on it. I guess they think my S32 policy is going to pay out & assume it will be £39.08.
Next I looked at my NI contribution record:
39 years. Surely that's enough for a full pension? When I looked at this page:
https://www.gov.uk/government/publications/your-ne...
The only information I can find is that anyone with no NI record before 2016 needs 35 years, but no mention of how many years the majority of the population (those with NI records before 2016) needs.
I can't even get the number of years on the site to add up - they say 39 but I counted up all the years listed on the website & I only make it 38. They've also given me qualifying years when I was at university & I don't recall working.
I called the helpline but after 20 minutes on hold I gave up. I'd cheerfully strangle the morons who designed the website without a print function as well. And don't get me started on the Government Gateway page which knows my name, address, email & phone number but crashes out saying it 'can't veriify my identity'.
Executive summary/TL:DR:
Is the COPE amount taken off what I can expect to receive?
Isn't 39 years NI contributions enough?
When are they likely to finish checking if I paid enough NI in 2015/16?
How the hell do the majority of the retiring population cope with this nonsense?
Interested as I had pretty much the same,
Expectation of achieving full Pension
Despite contracted out (tax year ‘98 on)
I had the figure shown for contracted out equiv I expectedas a deduction too but it didn’t seem to impact.
Also had credit for the years in eduction
My record was full & no years to top up, despite me only working a few months some years.
Biggest difference though was I didn’t want to call helpline & ask as it all seemed to be for the good!
Expectation of achieving full Pension
Despite contracted out (tax year ‘98 on)
I had the figure shown for contracted out equiv I expectedas a deduction too but it didn’t seem to impact.
Also had credit for the years in eduction
My record was full & no years to top up, despite me only working a few months some years.
Biggest difference though was I didn’t want to call helpline & ask as it all seemed to be for the good!
It doesn't say that you are missing 5 years of contributions.
£168.60 is what you will get assuming that you will continue contributing until your State pension age. That date is 5 years in the future.
£145.77 is what you have accrued so far at the date of the forecast.
So, I think that the 5 years you are concerned about is simply the years between State pension date and the time of the forecast.
R.
£168.60 is what you will get assuming that you will continue contributing until your State pension age. That date is 5 years in the future.
£145.77 is what you have accrued so far at the date of the forecast.
So, I think that the 5 years you are concerned about is simply the years between State pension date and the time of the forecast.
R.
The Leaper said:
It doesn't say that you are missing 5 years of contributions.
£168.60 is what you will get assuming that you will continue contributing until your State pension age. That date is 5 years in the future.
£145.77 is what you have accrued so far at the date of the forecast.
So, I think that the 5 years you are concerned about is simply the years between State pension date and the time of the forecast.
There aren't 5 years between now & April 2023 though, which is when it says I have to contribute 5 more years by.£168.60 is what you will get assuming that you will continue contributing until your State pension age. That date is 5 years in the future.
£145.77 is what you have accrued so far at the date of the forecast.
So, I think that the 5 years you are concerned about is simply the years between State pension date and the time of the forecast.
Any ideas on the COPE issue?
OP,
COPE stands for Contracted Out Pension Equivalent.
You have already said that you are aware that you have had a period of employment when you were contracted out of the State pension system. That's a good start!. When you are contracted out you must earn a minimum level of pension in a company sponsored pension plan, and this is instead of earning a State pension for the same period. This minimum pension is now called a COPE.
In return for being contracted out your NICs are reduced for the same period.
When you get to State pension age you will get the company pension which will include the COPE.
Since 2015 (I think) all State pension forecasts show the COPE for anyone who was contracted out of the State pension. The intention is to ensure people are aware that there is also a COPE payable to them from a company plan in addition to their State pension. Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension. It is not included: it's there for information only.
HTH.
R.
COPE stands for Contracted Out Pension Equivalent.
You have already said that you are aware that you have had a period of employment when you were contracted out of the State pension system. That's a good start!. When you are contracted out you must earn a minimum level of pension in a company sponsored pension plan, and this is instead of earning a State pension for the same period. This minimum pension is now called a COPE.
In return for being contracted out your NICs are reduced for the same period.
When you get to State pension age you will get the company pension which will include the COPE.
Since 2015 (I think) all State pension forecasts show the COPE for anyone who was contracted out of the State pension. The intention is to ensure people are aware that there is also a COPE payable to them from a company plan in addition to their State pension. Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension. It is not included: it's there for information only.
HTH.
R.
The Leaper said:
(Edited)
Since 2015 (I think) all State pension forecasts show the COPE for anyone who was contracted out of the State pension. The intention is to ensure people are aware that there is also a COPE payable to them from a company plan in addition to their State pension. Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension. It is not included: it's there for information only.
My forecast does indeed show the COPE value: £39.08. However, I'm still unclear if I can expect this value to be deducted from the £168.50 which is the maximum SP value & what I can attain if I make 5 years payments. Are you saying if I hadn't been contracted out then my SP would be £168.60 + £39.08? I'm not sure that is the case & I'm fearing I will get paid £168.60 minus £39.08 as my SP.Since 2015 (I think) all State pension forecasts show the COPE for anyone who was contracted out of the State pension. The intention is to ensure people are aware that there is also a COPE payable to them from a company plan in addition to their State pension. Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension. It is not included: it's there for information only.
From the Which site:
"Under the new system, as with the old one, those who contracted out will get less state pension than those who didn’t."
But it looks like I'm not as it seems I can get £168.60 (by paying in 5 more years) & whatever my Section 32 pension pays out (currently this would actually be a GMP of £52.31 with 5% annual increase if the 1996 documentation I have is correct).
I'm sorry to appear obtuse but I don't believe the wording is clear at all. Saying "COPE doesn't affect your SP value" (as the .GOV website does) but then not making it clear if the £168.60 includes the money paid by my S32 pension or not is very unhelpful.
The Leaper said:
.....
When you are contracted out you must earn a minimum level of pension in a company sponsored pension plan.....
Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension.
It is not included: it's there for information only.
R.
Selected bits - This is what I was seeking clarity on.When you are contracted out you must earn a minimum level of pension in a company sponsored pension plan.....
Unfortunately, many people get confused as to what the COPE is and whether or not it has been included in the forecast State pension.
It is not included: it's there for information only.
R.
From mine & the OP’s statements I’m inclined to think we will get full state pension “and” the COPE from 3rd party provider - ( this strikes me as unlikely but we maybe “won”)
I put my contracted out date from 98 onwards as I think there were changes just before this & definitely previous to those changes there was a deduction for COPE.
Some reading I did suggested that these deductions could never be made up even if you had 40years working not contracted out, but everything I saw also seemed to reference rules before ‘98
My pension fund that received the contracted out rebates was not set up or administered by my company at the time, but was a personal pension with Equitable Life (money purchase)
(NI rebates for a number of years were the sole contributions) there was no requirement to receive a minimum level of pension, I bought & changed units as I pleased & was/is largely equity based.
It’s now no longer with Equitable but my statement did used to show as a separate pot which I understood prior to the “pension freedoms” I had restrictions on how I accessed the cash on retirememt.
Eta. I was planning asking all this to the “which” finance team as I subscribe there & see what they make of it.
Edited by AndyAudi on Saturday 27th April 04:59
OP,
The COPE is paid in addition to your State pension. The COPE will come from either a company sponsored pension plan or a personal pension plan depending on the type of plan you had for the period of contracted out employment. The COPE will form a part of the total pension paid from that pension plan or it could be all of that plan pension. This will depend on the basis pf the pension plan: was it used just as a way to reduce NICs and so therefore provides minimum benefits as least as good as whet you would have got from the State pension had you not been contracted out, or was it used to provide benefits greater than the State pension? The latter is the more likely.
R
The COPE is paid in addition to your State pension. The COPE will come from either a company sponsored pension plan or a personal pension plan depending on the type of plan you had for the period of contracted out employment. The COPE will form a part of the total pension paid from that pension plan or it could be all of that plan pension. This will depend on the basis pf the pension plan: was it used just as a way to reduce NICs and so therefore provides minimum benefits as least as good as whet you would have got from the State pension had you not been contracted out, or was it used to provide benefits greater than the State pension? The latter is the more likely.
R
The Leaper said:
The COPE is paid in addition to your State pension. The COPE will come from either a company sponsored pension plan or a personal pension plan depending on the type of plan you had for the period of contracted out employment. The COPE will form a part of the total pension paid from that pension plan or it could be all of that plan pension. This will depend on the basis pf the pension plan: was it used just as a way to reduce NICs and so therefore provides minimum benefits as least as good as whet you would have got from the State pension had you not been contracted out, or was it used to provide benefits greater than the State pension? The latter is the more likely.
Ok, so it seems I can achieve the full amount of £168.60 if I make five years of vouluntary NI payments. The COPE section will be paid from a personal pension as the original company scheme was wound up & I had to transfer the funds out. My advisor at the time put me into a Scottish Widows personal pension with two parts: a Section 32 policy which has a GMP & covers what is now the COPE liability & substantially larger 'normal' policy which was invested in an 'Adventurous' fund, although it's performance hasn't been spectacular.There's a twist though in that the S32 policy has a GMP but it was calculated in the heady days of the mid 90s & it's highly unlikely that the fund will cover the cost. Normally SW would have to cover the shortfall themselves but one of the terms of the policy seems to be that they can lay claim to the larger Adventurous fund to help pay the S32 pension. By my reading of the terms I can't do anything with the policy (like transfering the Adventurous section elsewhere) without losing the S32 GMP.
I still need to call HMRC though to sort out when they will know if the last three years are qualifying for NI though as the text just says "we don't know yet".
What a horrendous mess the whole State Pension thing is.
AndyAudi said:
(Edited for brevity)
My pension fund that received the contracted out rebates was not set up or administered by my company at the time, but was a personal pension with Equitable Life (money purchase)
(NI rebates for a number of years were the sole contributions) there was no requirement to receive a minimum level of pension, I bought & changed units as I pleased & was/is largely equity based.
It’s now no longer with Equitable but my statement did used to show as a separate pot which I understood prior to the “pension freedoms” I had restrictions on how I accessed the cash on retirememt.
I don't know if yours was the same but as I have said above my personal pension had two parts with the Section 32 part having some (moderately) valuable GMP rights. If yours was the same are you sure you knew you were giving these up when you moved away from Equitable? My pension fund that received the contracted out rebates was not set up or administered by my company at the time, but was a personal pension with Equitable Life (money purchase)
(NI rebates for a number of years were the sole contributions) there was no requirement to receive a minimum level of pension, I bought & changed units as I pleased & was/is largely equity based.
It’s now no longer with Equitable but my statement did used to show as a separate pot which I understood prior to the “pension freedoms” I had restrictions on how I accessed the cash on retirememt.
Mr Pointy said:
I don't know if yours was the same but as I have said above my personal pension had two parts with the Section 32 part having some (moderately) valuable GMP rights. If yours was the same are you sure you knew you were giving these up when you moved away from Equitable?
No, my pension fund never had any GMP applicable.Mr Pointy said:
Ok, so it seems I can achieve the full amount of £168.60 if I make five years of vouluntary NI payments.
Is that correct? I really don't know, but I thought it was just saying you had 5 more years to go and was assuming you'd contribute for those years.I'm a few months ahead of you - retirement date is Apr 23 - and I ran my forecast a couple of months ago. Mine is very similar numbers - £144.25 to Apr 18 and £164.35 (which was the max in 2018) if I contribute for 5 more years.
My cope estimate is £113.09.
Sheepshanks said:
Mr Pointy said:
Ok, so it seems I can achieve the full amount of £168.60 if I make five years of vouluntary NI payments.
Is that correct? I really don't know, but I thought it was just saying you had 5 more years to go and was assuming you'd contribute for those years.I'm a few months ahead of you - retirement date is Apr 23 - and I ran my forecast a couple of months ago. Mine is very similar numbers - £144.25 to Apr 18 and £164.35 (which was the max in 2018) if I contribute for 5 more years.
My cope estimate is £113.09.
I'm still finding confusion about the COPE amount & have found several references to it actually being deducted from the forecast. I'm going to have to call the helpline to find out a definative answer.
I was looking at the performance of the S32 personal pension I was put into back in 1997:
1997: £13,870
2019: £37,350
So 172% in 22 years, about 4.6% pa. Not exactly stellar performance.
You could take a butchers at this. Straightforward not!
https://www.royallondon.com/media/good-with-your-m...
On the contracting-out/SERPS/S2P point, the rules have been changed so many times it's very hard to know where one stands. It's not easy for the man in the street to confirm that DWP have correctly calculated their SP. UK was the only western nation to introduce contarcting-out. I wonder why?
https://www.royallondon.com/media/good-with-your-m...
On the contracting-out/SERPS/S2P point, the rules have been changed so many times it's very hard to know where one stands. It's not easy for the man in the street to confirm that DWP have correctly calculated their SP. UK was the only western nation to introduce contarcting-out. I wonder why?
Downward said:
So is there a maximum number of years to pay NI to get the state pension then ?
Since it’s now 68 some people are going to have 50+ years of contributions.
I think it was 30 and is now 35 years. Quite why I'll apparently hit the maximum, I have no idea - I've been contracted out for most of my working life.Since it’s now 68 some people are going to have 50+ years of contributions.
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