State pension & impact of being opted out

[HopeNotFear]

Hi, I have a couple of questions regarding NI contributions and the impact of being opted out, and am hoping someone who understands pensions can clarify for me.

I’ve been on the Government website, any my forecast is that I need to make NI contributions for another 5 years to get the full pension of £159.55 (I’m currently 52).

At the moment I’m working part-time and only earn £139 per week so do not pay NI. The Government website states “If you earn between £113 and £157 a week (as I do), your contributions are treated as having been paid to protect your National Insurance record”. Does this mean I will receive NI credits which in turn will count towards my state pension award? If not, what does it mean?

My second question relates to the years I was a member of my employers final salary scheme and was opted out. According to the Government website, my COPE estimate is £48.79. Will this amount be deducted from my final salary pension when I am 67? If so, is there anyway I can reduce this amount, i.e., if I was to pay NI contributions for another 10 years would it reduce the £48.79 COPE estimate?

Many thanks in advance for your help.

You mean contracted out, not opted out. The £48.79 is the minimum amount your final salary scheme must pay you - as long as they pay you at least that much, nothing further will happen. It’s not deducted from your final salary pension. You can’t do anything to change this figure now it’s accrued.

Don’t know the answer to your first question but would read the website guidance in the same way you have.

Hi Chelsie, thanks for your reply and yes I do mean contracted out.

When I left my old employer, they sent me a letter confirming my final salary pension was frozen at approx £13k. I thought this would reduce by the COPE amount when I reach 67. My final salary cannot only be £48.79 per week!

I have tried reading the government website, several times but I find it too confusing.

Anyone else able to help?

If you get 5 or more more years of NI contributions, then your state pension will be £159.55 less the COPE amount. COPE is deducted from your state entitlement not your final salary one, although the government website really does not make this very clear at all, and imo is downright misleading as it appears to say your entitlement will be the full amount. Your final salary pension should more than cover the shortfall. More NI contributions won't reduce the COPE amount unfortunately.

Thanks for your reply SleepingSoundly, think I understand it all now, although pensions are very confusing.

I cannot do links but if you google moneybox and cope and also search on Paul Lewis and contracted out you should find some articles on people who have been contracted out of serps but are in fact able to reduce the cope amount by additional NI contributions. PAul Lewis calls it a paradox, it's a loophole which can make a big difference to some people
IF someone can do the link for us that would be useful

I agree the dwp pension forecasts are misleading as they should give you the figure you will get, the cope amount given it is not clear whether it is taken off or not. Even when I phoned the staff member I spoke to was not clear

SleepingSoundly I am confused even more now - I looked at my projected pension - I have 36 years of contributions (one of which doesn't qualify as I paid too little) and site tells me that if I make three more years contributions I will be eligible for the full state pension - even though you need 35 years of contributions to qualify?!. It goes on to say that I have been contracted out (Local government) but that the COPE amount is taken from my workplace pension and that it doesn't affect the state pension which will still receive at the full amount - providing I make three years more of contributions (even though I have accumulated 35 already)???
Pensions are just so confusing - esp with the announcement the other day that even private pensions are now going to be hit with the 19% tax. Makes you wonder what the point is and it is easy to see why people put their head in the sand about them and hope for the best.