Contracted out pension

[Moomuffin]

Hi,

I’m posting on behalf of my mother in law.

My MIL worked for the inland revenue for 38 years. She finished work at the start of covid and is living off her civil service pension and savings until she can claim her state pension in 2 years time.

She recently found out that she’s not made full contributions due to the contracting out and is worried that she won’t receive full state pension.

Her online pension forecast says she should get full amount but she can’t seem to get a straight answer off anyone. It shows a cope amount of about £49 and she doesn’t know what this means.

She’s tried ringing the pensions service, HMRC, the civil service pension scheme and no one can tell her whether she’s entitled to fill state pension.

I can’t seem to find a straight answer online.

Does anyone know if she’ll get the full state pension?

Many Thanks

The online pension forecast is very confusing. Tell her to look carefully - there are two main numbers:

Forecast if you contribute another <x> years before <retirement date>

and

Estimate based on your National Insurance record up to 5 April 2023

If she does nothing then she will get the amount it says in the estimate.

She can increase that to the amount it says in the forecast either by working, or by paying voluntary class 3 NI contributions. Each extra year you buy costs about £800 (one off cost) and increases your pension by around £5 a week for the whole of your retirement, so you only have to live 4 years after retiring for it to be a bargain.

It's more confusing than that becuse there's also a COPE amount on the forecast. Mines £10. I don't know what that means for my ultimate payment either.

This page explains it all quite well:
https://rtsfinancialplanning.co.uk/why-you-might-not-get-a-full-state-pension-even-with-35-years-national-insurance-contributions/

The COPE amount is the governments estimate of what your private pension (if you have one) will pay you in addition to the state pension.

The idea was that you opted out of the state second (additional) pension and instead paid it into a private pension which if you had done the government estimate is how much they think it would pay.

My COPE amount is £40 but my private pension will actually pay me far, far more than that.

You can ignore the COPE amount if you just want to know what the government will pay you.

She also needs to go on the .Gov page which has her personal contributions record, she can check year by year to make sure each year is covered as it should be, and identifying any gaps or errors.

How would the government know what I’ve paid into a private pension though?

Yes it’s showing that she has a full record. She mentioned that she’s paid £1600 to cover two years but I’m not 100% sure what that was for.

It doesn’t say anything about having to pay an additional amount, it literally gives her the forecast and tells her she can claim it in March ‘25.

Then further down it mentions the COPE, if you click on that link then it says the COPE amount is something like £49 per week.

So she’s worrying that this £49 is going to be deducted from her state pension.

If she's only ever worked for the Inland Revenue, she will have been contracted out for 38 years. She will have only been paying the full amount since 2015. So no, I suspect she will not receive the full amount.

The estimated pension figure should be on there underneath the years paid. She won’t get a full state pension because of the opt out on her occupational pension.

The COPE amount definitely doesn’t get deducted. She can ignore it. It was just used in the calculations from the old to the new system - beyond that it’s a red herring. She will get ALL the pension in her state pension forecast, plus whatever is in her civil service pension forecast.

How would the government know what I’ve paid into a private pension though?

Because the rate at which NI was paid was different if you had a private pension.

Of course she will if that's what it says!

This is what her forecast shows x

That's the max and that's what she'll get

Yes I believe this is the case. I rang HMRC to ask about it on my forecast. I was told the forecast was accurate and they just showed COPE in case anyone wanted to see it. I told them it was confusing and they agreed.

@Moomuffin the £1600 sounds like she paid 2 years voluntary NI.

I am like your MIL that I was CS for 37 years and retired during Covid.

In 2016 we moved from the old state pension to the new state pension. At that time they calculated what we would get under the old state pension and that became our starting point for the new state pension.

In 2016 I needed a further 7 years to get a full pension. I added 4 years whilst working. Then I topped up 2020/21 , as I paid some NI. I am now waiting until I can pay 2 further years which will be c£1600.

Your MIL will get her £1600 back if she draws her state pension for just over 3 years so a good investment.

@Sisterpita

So am I right in thinking that because her forecast doesn’t say that she needs to contribute anymore years to qualify, that she’s fine and will get the full amount?

Its so so confusing

@Moomuffin You attached a photo of the top part of the forecast.

If you read down the page there should be two thick green lines. Above the first it states estimate based on NI record to 05/04/2022

Above the second it states Forecast if you contribute another x years before (date).

If the first line shows £203.85 she is fully paid up. If it is less than that then the second states how many years to pay.

@Sisterpita

I don’t have access now but from what I remember, it just gives the one figure of £203 then it gives a link to her NI record and the COPE figure.

@Moomuffin It sounds like she is OK. When you can just get her to log in and double check.

It's the bit below your screenshot which is important.

The forecast assumes you are still paying NI.

COPE is, kind of, the bit they think you will get from your private pension that makes up for the reduction in state pension.

35 years is irrelevant to anyone of your mum's age who was contracted out.

Have a look on the MSE pension board for a much fuller explanation, it's a really helpful board.

This is what my forecast looks like. I am a teacher and also paid a contracted out contribution for many years.
As you can see, my forecast for a full state pension is based on me contributing for a further 2 years.
The second photo shows that I have 45 years of full contributions but need 2 more. Of those 45 years, 33 of them are as a teacher.

She will get the full amount showing on your picture OP. The contracted out bit was for the 2nd or additional state pension.
She will also have her civil service pension which is where the cope figure comes in. You can really ignore the cope part she is entitled to the full £203 per week

@rainbowunicorn you can’t say that just from the top bit as it’s forecast of what you could get not what you will get. You need to look lower down the page to see if that forecast is based on paying more years NI.