contracting out - Don't let it be a surprise

[stephen500]

What is contracting out and when did it end?
Well for those of us who where in the Royal Mail final salary scheme, un beknown to us and to the shame of the UPW/CWU/Royal Mail at the time who never never told us, we were paying reduced National insurance contributions because we were entrolled in this scheme.
Yes we saved money in Nat Ins contributions, but none of us knew that the price for that would be a reduced state pension.
In 2016 the government ended contracting out and my state pension had, un beknown to me, reduced to £136-£138 a week.
Sadly for those who left Royal Mail in 2016 and retired and never worked again, they are stuck with this reduced pension unless -- See below
The Good news for those still in Employment at 2016- As the contracting out ended, we started paying normal rates of Nat insurance.
This meant our state pension started going up with every one elses in the country at the rate of around £4.60 a year.
This has meant that between 2016 and 2020, I have added £18.40 to my state (weekly pension) and it is now £156.80.
If I was to continue in employment for another 4 years, my state pension would rise by another £4.60 a year and become a full state pension of £175.20
As I am leaving at the end of the year and do not plan to work again, it will actually be £161.40.
What could I do about that? Or you do for yourself?
Well I could work another 4 years and you could work whatever years you needed to get a full state pension.
Or I could pay class 3 nat ins contributions (Voluntarily) to make up for those years at a rate of £795.60 per year (2020 rate)
If I paid 4 years, or you paid whatever gap years you have (this can only be done within 6 years from the missing gap year) my pension would be a full state pension.
For me I would I to pay 4 years at £795.60 = £3182 giving me an extra £14 per week state pension.
That means if I lived for just over 4 years till 71 I would start gaining.
If you left employment or retired in 2016, you can still pay the gap years voluntarily , but you must do so within the next 2 years or, I presume before you take your state pension.
Before you do any thing, check your state pension forecast, using the links below and see how close you are to the full state pension and how long you have to work to get to it or what payments you would need to make.
You can work it out for yourself and use the link below to pay your Class 3 national insurance contributions or do a google search.
https://www.which.co.uk/money/tax/natio ... 98l1j10nh3
https://www.gov.uk/pay-voluntary-class- ... -insurance
https://www.gov.uk/check-state-pension

state forecast.jpg

[derricksmyth]

What is contracting out and when did it end?
Well for those of us who where in the Royal Mail final salary scheme, un beknown to us and to the shame of the UPW/CWU/Royal Mail at the time who never never told us, we were paying reduced National insurance contributions because we were entrolled in this scheme.
Yes we saved money in Nat Ins contributions, but none of us knew that the price for that would be a reduced state pension.
In 2016 the government ended contracting out and my state pension had, un beknown to me, reduced to £136-£138 a week.
Sadly for those who left Royal Mail in 2016 and retired and never worked again, they are stuck with this reduced pension unless -- See below
The Good news for those still in Employment at 2016- As the contracting out ended, we started paying normal rates of Nat insurance.
This meant our state pension started going up with every one elses in the country at the rate of around £4.60 a year.
This has meant that between 2016 and 2020, I have added £18.40 to my state (weekly pension) and it is now £156.80.
If I was to continue in employment for another 4 years, my state pension would rise by another £4.60 a year and become a full state pension of £175.20
As I am leaving at the end of the year and do not plan to work again, it will actually be £161.40.
What could I do about that? Or you do for yourself?
Well I could work another 4 years and you could work whatever years you needed to get a full state pension.
Or I could pay class 3 nat ins contributions (Voluntarily) to make up for those years at a rate of £795.60 per year (2020 rate)
If I paid 4 years, or you paid whatever gap years you have (this can only be done within 6 years from the missing gap year) my pension would be a full state pension.
For me I would I to pay 4 years at £795.60 = £3182 giving me an extra £14 per week state pension.
That means if I lived for just over 4 years till 71 I would start gaining.
If you left employment or retired in 2016, you can still pay the gap years voluntarily , but you must do so within the next 2 years or, I presume before you take your state pension.
Before you do any thing, check your state pension forecast, using the links below and see how close you are to the full state pension and how long you have to work to get to it or what payments you would need to make.
You can work it out for yourself and use the link below to pay your Class 3 national insurance contributions or do a google search.
https://www.which.co.uk/money/tax/natio ... 98l1j10nh3
https://www.gov.uk/pay-voluntary-class- ... -insurance
https://www.gov.uk/check-state-pension

state forecast.jpg

Stephen , are there part years in your Nat Insurance , you can go back to 2006 to pay cat 3, i think , my wife done this and paid £76.00 to make up one year. It maybe better than paying £795.60 if you have paid for part years already.

[stephen500]

What is contracting out and when did it end?
Well for those of us who where in the Royal Mail final salary scheme, un beknown to us and to the shame of the UPW/CWU/Royal Mail at the time who never never told us, we were paying reduced National insurance contributions because we were entrolled in this scheme.
Yes we saved money in Nat Ins contributions, but none of us knew that the price for that would be a reduced state pension.
In 2016 the government ended contracting out and my state pension had, un beknown to me, reduced to £136-£138 a week.
Sadly for those who left Royal Mail in 2016 and retired and never worked again, they are stuck with this reduced pension unless -- See below
The Good news for those still in Employment at 2016- As the contracting out ended, we started paying normal rates of Nat insurance.
This meant our state pension started going up with every one elses in the country at the rate of around £4.60 a year.
This has meant that between 2016 and 2020, I have added £18.40 to my state (weekly pension) and it is now £156.80.
If I was to continue in employment for another 4 years, my state pension would rise by another £4.60 a year and become a full state pension of £175.20
As I am leaving at the end of the year and do not plan to work again, it will actually be £161.40.
What could I do about that? Or you do for yourself?
Well I could work another 4 years and you could work whatever years you needed to get a full state pension.
Or I could pay class 3 nat ins contributions (Voluntarily) to make up for those years at a rate of £795.60 per year (2020 rate)
If I paid 4 years, or you paid whatever gap years you have (this can only be done within 6 years from the missing gap year) my pension would be a full state pension.
For me I would I to pay 4 years at £795.60 = £3182 giving me an extra £14 per week state pension.
That means if I lived for just over 4 years till 71 I would start gaining.
If you left employment or retired in 2016, you can still pay the gap years voluntarily , but you must do so within the next 2 years or, I presume before you take your state pension.
Before you do any thing, check your state pension forecast, using the links below and see how close you are to the full state pension and how long you have to work to get to it or what payments you would need to make.
You can work it out for yourself and use the link below to pay your Class 3 national insurance contributions or do a google search.
https://www.which.co.uk/money/tax/natio ... 98l1j10nh3
https://www.gov.uk/pay-voluntary-class- ... -insurance
https://www.gov.uk/check-state-pension

state forecast.jpg

Stephen , are there part years in your Nat Insurance , you can go back to 2006 to pay cat 3, i think , my wife done this and paid £76.00 to make up one year. It maybe better than paying £795.60 if you have paid for part years already.

Perhaps Robert T could let us know.
The "which" site says within the last 6 years? "You can normally go back a maximum of six years to fill National Insurance contributions gaps, though some people may be able to top-up over a longer period."

Read more: https://www.which.co.uk/money/tax/natio ... 98l1j10nh3" onclick="window.open(this.href);return false; - Which?
Not for me within the last 6 years.
That would be good for some one who was part time?

[RobertT]

I have an old RM plan guide from the 1990's when section A/B was called POSSS and section C was POPS - I'm C! It clearly says the scheme is contracted out of SERPS.
The problem, perhaps is many people don't really take much notice of their pension until they're close to taking it!

The current accrual rate of the state pension is 1/35th of the full rate, meaning each year since 2016 everyone earning at least £120 per week(2020/21 rate) has increased their entitlement by £5.

In practice the older you are and the longer you were contracted out, the more you're likely to be affected. Personally although I've been with RM for over 30 years, I'm young enough the be able to make up the difference by working, and will reach the full rate by the time I'm 55 at the latest.

The state pension will be a major part of most people's income in retirement, so if you don't know how much yours is going to be, get yourself a forecast. Anyone can do it, at any age: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

[RobertT]

Stephen , are there part years in your Nat Insurance , you can go back to 2006 to pay cat 3, i think , my wife done this and paid £76.00 to make up one year. It maybe better than paying £795.60 if you have paid for part years already.

Perhaps Robert T could let us know.

You can top up part years, but I'm not too sure how far back you can go.
This might help: https://www.gov.uk/voluntary-national-i ... tributions" onclick="window.open(this.href);return false;

[david3595]

My state pension forecast based on N I payments up to March this year and since 1982 is £164.64 with 3 more years contributions to get to current £175. Pre 1987 N I payments with another employer

[stephen500]

Stephen , are there part years in your Nat Insurance , you can go back to 2006 to pay cat 3, i think , my wife done this and paid £76.00 to make up one year. It maybe better than paying £795.60 if you have paid for part years already.

Perhaps Robert T could let us know.

You can top up part years, but I'm not too sure how far back you can go.
This might help: https://www.gov.uk/voluntary-national-i ... tributions" onclick="window.open(this.href);return false;

https://www.gov.uk/voluntary-national-i ... /deadlines

[Steve_claret]

Yep, always worth checking your state pension well in advance of receiving it. It's easy to do via https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

I did mine last year and I am due £159.43. To get the full £175.20 I would have to work another 4 years which is definitely not in my plans.

[stephen500]

Yep, always worth checking your state pension well in advance of receiving it. It's easy to do via https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

I did mine last year and I am due £159.43. To get the full £175.20 I would have to work another 4 years which is definitely not in my plans.

Or you could pay Vol contributions as above.

[vmaxv4]

I have an old RM plan guide from the 1990's when section A/B was called POSSS and section C was POPS - I'm C! It clearly says the scheme is contracted out of SERPS.
The problem, perhaps is many people don't really take much notice of their pension until they're close to taking it!

The current accrual rate of the state pension is 1/35th of the full rate, meaning each year since 2016 everyone earning at least £120 per week(2020/21 rate) has increased their entitlement by £5.

In practice the older you are and the longer you were contracted out, the more you're likely to be affected. Personally although I've been with RM for over 30 years, I'm young enough the be able to make up the difference by working, and will reach the full rate by the time I'm 55 at the latest.

The state pension will be a major part of most people's income in retirement, so if you don't know how much yours is going to be, get yourself a forecast. Anyone can do it, at any age: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

I did as suggested on checking with the gov website and was satisfied that with my information. UNTIL a media report suggested that not all “ Pension Holidays “ were being covered through the website and therefore to personally contact the State Pension Helpline for a personal written quote.
I duly did so and was informed that the “Contracted- Out Pension Equivalent (Cope)” quote was the only one I should use to satisfy my contributions would give me my full entitlement of state pension when I was 65.

[stephen500]

I have an old RM plan guide from the 1990's when section A/B was called POSSS and section C was POPS - I'm C! It clearly says the scheme is contracted out of SERPS.
The problem, perhaps is many people don't really take much notice of their pension until they're close to taking it!

The current accrual rate of the state pension is 1/35th of the full rate, meaning each year since 2016 everyone earning at least £120 per week(2020/21 rate) has increased their entitlement by £5.

In practice the older you are and the longer you were contracted out, the more you're likely to be affected. Personally although I've been with RM for over 30 years, I'm young enough the be able to make up the difference by working, and will reach the full rate by the time I'm 55 at the latest.

The state pension will be a major part of most people's income in retirement, so if you don't know how much yours is going to be, get yourself a forecast. Anyone can do it, at any age: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

I did as suggested on checking with the gov website and was satisfied that with my information. UNTIL a media report suggested that not all “ Pension Holidays “ were being covered through the website and therefore to personally contact the State Pension Helpline for a personal written quote.
I duly did so and was informed that the “Contracted- Out Pension Equivalent (Cope)” quote was the only one I should use to satisfy my contributions would give me my full entitlement of state pension when I was 65.

This "cope" scared me to death, I thought for a moment it was the amount my state pension would be reduced by. My cope amount is £86.04. But from reading about it, it has nothing to do with my actual state pension forecast. It is some thing to do with what the state expected our Royal mail pension to make up.
https://forums.moneysavingexpert.com/di ... d-out-cope

[vmaxv4]

The personal quote I received was inline with the website details.

[vmaxv4]

I have an old RM plan guide from the 1990's when section A/B was called POSSS and section C was POPS - I'm C! It clearly says the scheme is contracted out of SERPS.
The problem, perhaps is many people don't really take much notice of their pension until they're close to taking it!

The current accrual rate of the state pension is 1/35th of the full rate, meaning each year since 2016 everyone earning at least £120 per week(2020/21 rate) has increased their entitlement by £5.

In practice the older you are and the longer you were contracted out, the more you're likely to be affected. Personally although I've been with RM for over 30 years, I'm young enough the be able to make up the difference by working, and will reach the full rate by the time I'm 55 at the latest.

The state pension will be a major part of most people's income in retirement, so if you don't know how much yours is going to be, get yourself a forecast. Anyone can do it, at any age: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

I did as suggested on checking with the gov website and was satisfied that with my information. UNTIL a media report suggested that not all “ Pension Holidays “ were being covered through the website and therefore to personally contact the State Pension Helpline for a personal written quote.
I duly did so and was informed that the “Contracted- Out Pension Equivalent (Cope)” quote was the only one I should use to satisfy my contributions would give me my full entitlement of state pension when I was 65.

This "cope" scared me to death, I thought for a moment it was the amount my state pension would be reduced by. My cope amount is £86.04. But from reading about it, it has nothing to do with my actual state pension forecast. It is some thing to do with what the state expected our Royal mail pension to make up.
https://forums.moneysavingexpert.com/di ... d-out-cope

When I had the conversation with the knowledgeable guy he warned me that I was going to receive information on what the shortfall would be in my contributions over my remaining years until I were to retire.
And if my memory serves me right it was probably a “ Martin Lewis” Q&A on this very subject..

[vmaxv4]

I was approached by a colleague who was interested in his mate receiving information on his shortfall of 2 years costing around about £900 per year to get his full state pension.
I then spoke to my 2 mates who are 3+ Months older than me & who were on a “ Pension Holiday “ for the 13 years I was. To check their actual date of receiving the full state pension.
All 3 of us have Final Date of 5 April 2025..
It should also be noted any shortening the time line ie ( Voluntary Retirement) would also impact on collecting the full amount.

[stephen500]

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