Contracting out and new state pension

[Morph22010]

Wondered if someone might be able to give me answer on this, feel like it’s something I should understand as I work in a finance role (not pensions) but I can’t get my head round the guidance. I started my pension approx 1998 and I contacted out until 2016 when it ended so 18 years. I am 50 and have, all but two years ni contributions from age 16 and I’ll be working for at least another 10 years all being well so I’ll be well over the 35 years for new state pension. My question is I get a deduction to the new state pension figure for my contracting out years, once I have gone above 35 years contributions in total does my deduction for contracting out years go down or is it always a fixed figure. To put another way can one of my later years be counted towards the 35 and one of the contracting out years drop out?

The best way to find out what your state pension position is, is to do a pension forecast. https://www.gov.uk/check-state-pension

Tour understanding of how state pension works is a little confused. The 35 years only relates to those joining the workforce in 2016 or later.

In your case in 2016 DWP worked out your entitlement under the old pension rules and this became your starting rate for the new state pension. Each year of full NI since then added 1/35th of the state pension rate.

You may have some entitlement to additional pension which is where you get a COPE figure which is the minimum your employer pension must pay.

This means the only way you can know your position is to do the forecast.

From April 2016 you can earn back state pension for every year paid after 35 years payments at a rate of around £4 per week per year. I was £20 per week short on the new pension due to contracting out but was told if I paid NI for another 5 years I would qualify for the full pension.

If you have a gateway account that will tell you how many years you will need.

i thought the 35 years relates to when you start drawing your pension. If that is 2016 or later, then you need 35 years contributions for a full new state pension.

@RockyRoadster if you have 35 qualifying years from 2016, so you reach state pension age after 2051 this is currently correct. Note: the rules can change.

If you have qualifying years prior to 2016 it is more complicated and you need to do a pension forecast.

The 35 years is slightly misleading which is why I advise everyone to do a pension forecast regularly. I do mine annually each January.

The headline of 35 years for a full pension is misleading.

Typically, if you were in a career pension and contracted out of the pre 2016 scheme you will not get the full 'new' pension of 203.85 after 35 years. You can however continue to build new pension beyond 35 years if you work and pay, or are credited with, NICs.

I was in the Civil Service and contracted out from 1978 until 2013. Those years will not give me a full pension. However, since 2015 I've worked for a charity and the concept of being contracted out ended in 2016. By the time I'm 66 in 2025 I will have enough years/conts for a full pension.

HTH.

As above, looking at your record and pension prediction on line should give you the infortmation you need to understand what's going to happen going forward.

My own position doesn't make sense to me (despite being an accountant).

My forecast shows 31 full years and 4 not full (2 at uni & 2 working abroad - so happy with those).
An amount (lower than full current pension) based on current contributions - okay that makes sense.
Then 4 years to contribute to achieve full pension.

Yet I was contracted out, via contributions to a personal pension, from shortly after starting work at 21 - 1994/5 to when contracting out ended in 2016.

Separately, it shows a COPE estimate, I understand that this forms part of my personal pension.

What I don't understand is why 35 years still gives me the full pension, despite 20 years (2 years weren't full contributions anyway as abroad) of being contracted out.

I suppose I'd have to see how the entitlement @ 2016 is worked out to see how the contracting out impacted, but haven't ever investigated further to access the calculations behind it.

@Chasingsquirrels that looks about right.

Your numbers are very similar to mine except that I'm 11 or 12 years older so in the pension at 66 cohort. Serendipitously I'm hitting max pension at pretty much same time as I'm 66.

@Chasingsquirrels I'm in the same position - my forecast shows full pension entitlement after 35 "full years" even though I was contracted out for some of them.

Do you have children for whom you claimed child benefit? I think that that a full year's credit is given for those receiving CB up to the age of 12, irrespective of whether you were contracted out in those years. I can see in my statement that in some years I have apparently made over 52 weeks' NI contributions (some years up to 104!) and can only think this is because of the credit associated with child benefit.

Also, it used to be that well-paid employees who were contracted out were building up State Second Pension. I had a few statements sent to me years ago, regarding the amount that I was building up. When the new state pension was launched, SSP was abolished, but there was some kind of calculation done to ensure people weren't worse off - so perhaps both of us had some extra sum allocated to our records and it coincidentally means that we only need 35 years for a full state pension?

Certainly I feel fortunate that this is the case for me. I know some people who've been contracted out who need more than 35 years. Can be 40-50 years. So the only way to be sure is to do what you've done & check your own pension forecast on the govt website.

Bromptotoo
whatisthemime
I'm definitely not complaining.
Just seems odd that I'll have full entitlement by 55, despite 20 of those being contracted out, but that doesn't seem to be the case for everyone.
I was (still am) claiming child benefit from 30, till next summer, but have been working and paying sufficient NI for those years as well.
Maybe it is SSP related as well, that would make sense. I've been part time since 30, but still earning a reasonable amount.