Contracting out of State Pension

[Eightiesgirl]

Just wondering if anyone can clear up a pension query for me. I've just checked my state pension forecast and it states I have 12 years to make another 6 years NI contributions to get state pension forecast of approx 185 per week, which I will have no problem doing. It also said that I was contracted out of the state pension years ago and that the private contracted out pension scheme should pay me approx £7 per week at retirement. This is from a job I worked at for about 4 years in my early twenties. At the time I probably took no notice of what was going on! However, now I'm wondering whether this contracted out pension will be deducted from my state pension when I eventually come to claim it or will it be extra? In other words, if I earn another 6 years worth of national insurance credits and I become eligible for the full state pension when I am 67, however much that may be at that time, will the £7 per week be deducted from it? Thanks to anyone who can help me.

Anyone?

If you click on the explanation tab on your forecast it tells you what you need to know.

Mine states my contracted out years will not affect my pension it’s very complicated because of the change in 2016 I don’t understand it.

As a teacher, my pension is affected in that I need to pay NI for more years in order to get a full state pension. So although I have already got 40+ years of contributions, I still need to work until I’m 66 to receive a full pension.

How do you find out what your State pension looks like?

Tilllly. Go on the government gateway website. It will show you how many years you have paid and how much predicted to get plus when you get your pension

www.gov.uk/check-state-pension

It will be deducted. You cannot have it both ways

I was contracted out for some years until I stopped this. I’ve completed enough years (and more) so it says I will get full state pension. The other contracted out pension, 6 years of paying into now pays me £98 per month with a cash sum of £9,000 taken out.

@Mindymomo thank you, so in effect you are saying that you will get the contracted out pension on top of your full state pension which is exactly what I wanted to know.

This is incorrect. It will not be deducted. For the four years it relates to, you paid NI at a lower rate while you were paying into the private pension. The £7 is included in whatever you will get from the private pension. You don’t have to add or subtract it from the private pension either - it is just part of the calculation which goes into working out your private pension.

It used to be that if you were contracted out then you ended up with a lower state pension, but since the system changed in 2016 you automatically go on paying into your state pension until you get the higher rate which is the 185 a week.

@Happygirl79 then how do you explain that Mindymomo gets a full state pension and also her 6 years contracted out pension?

@Hazelnut5 many thanks for the reply. At the risk of sounding stupid, does that mean if I pay another 6 years NI contributions then at age 67 I will get the full state pension and will also get 7 per week from the private pension provider? When I was contracted out it was about 30 years ago and it was for approx 4 years. Obviously, it was well before 2016. Also, my state pension forecast says I have to pay contributions for 6 years in the 12 year period I have left till I reach 67. Will I have to also pay contributions for an extra 4 years on top of the 6 to cover the years I was contracted out? Apologies if I seem stupid but all this is complicated to me. Thanks again.

I am speaking from my own experience . I do not get a full state pension despite working full time for more than 40 years. My private pensions contracted me out of SERPS for the years I was in their schemes. I retired at almost 65 years of age. However I paid full national insurance contributions even when I could have opted to pay a married woman's smaller contribution. Also a graduated pension was part of my pension too.
As you say things may have changed with the introduction of the new state pension but if so I am being short changed as I get the new state pension but not the full amount. Its been said in the press that only about 5% of pensioners get the full state pension amount.
Perhaps I should be challenging the amount of state pension I receive?

Just click on the tab in your state pension forecast it tells you exactly how it will be dealt with.

@Happygirl79 thanks for the reply. It seems very unfair that you have worked all those years yet don't get the full state pension. It's all very complicated but I'd definitely look into it if I was you.

I shall contact DWP and ask them to check that I am receiving the correct amount but I am almost sure I am being paid correctly

Does that mean if I pay another 6 years NI contributions then at age 67 I will get the full state pension and will also get 7 per week from the private pension provider?
You’ll get the full state pension plus whatever your private pension is now worth. That’s likely to be more than £7 a week but the only way to find out is to ask the private pension provider. They won’t separate the private pension into the £7 plus the rest, it will just be a single value.

Will I have to also pay contributions for an extra 4 years on top of the 6 to cover the years I was contracted out?
No. Just the 6 years it says.

I worked in the NHS so paid a contracted-out rate of NI. Having taken early retirement, I now get my NHS pension but will still get the state pension when I'm of the relevant age. The state pension was previously reduced by about £30/month for those with contracted-out public service pensions, but according to the website I'm due to get the full amount when the time comes, so I'm not sure if that rule has changed.

Either way, yes, you can get both state pension and contracted out occupational pension.

If you register on the gov.uk website, it will not only tell you what your current state pension entitlement is, but it will also tell you if you need to make any extra payments to reach the full entitlement.

@Hazelnut5 thank you for the reply.

I’m a teacher. When l last checked mine it said l would get full state pension too.

You cannot contact out of the state pension. You contracted out of SERPS which was later called the SSP (second state pension). If you contribute 35 years of full NIC you will get the full state pension, SERPS or SSP would have given you even more. As some of your NIC have been directed to a pension pot, yiu won't have lost anything. It may even have grown more than the SSP would given you.

Pensions seem to be a total mystery. I get a state pension a bit more than the current (universal?) standard one + a private pension and I was opted out for a while (also a long time ago) Just happy to get whatever it is! Also extra years for university and child rearing I think. Totally baffled.

The system changed in 2016. After 2016 people who were previously contracted out were able to go on paying NI for a few extra years to top up their pension from the basic state pension to the higher rate, but maybe you didn’t work for long enough after 2016 to do that.

If everything in your post is accurate then you are being underpaid.