Contracted Out of State Pension?

[Mike G]

I've recently been reading about how some people with works pensions schemes were "contracted out" of the State Pension for a number of years.

I've never heard of this before and still have very little understanding of it but as far as I can gather it means that those who were "contracted out" of the State Pension won't then get their full State Pension even if they have made maximum contributions/full qualifying years.

Does this apply to us posties at all?

Specifically Section C in my case.

[Gary55]

I know I'm forecasted to get exactly the same as my wife who doesn't work for royal mail
We are both in our early sixties. I'm also section C

[RobertT]

Anyone who paid into the RMSPS/RMPP up to 2016 will have been contracted out of the 'state second pension' up to that point.

It doesn't necessarily mean you won't get the full rate of the state pension, because you'll have been earning credits since 2016.

The state pension is a very individual thing and how much you get will depend on your work history throughout your life.
So the best thing is to get yourself a forecast.

Details of that and how contracting out works can be found via the 'pension websites' link below.
v

[Mike G]

Thanks for the replies, I had no idea the State Pension was individually tailored and dependent on a various different things related to your work history, I stupidly assumed it was as simple as if you've got x number of qualifying years of making contributions you'll get £xxx per week State Pension!

It seems as clear as mud and an utter scandal, so I might or might not get the level of State pension commensurate with the number of years I was working and making NI contributions.

Just to add to my frustration I can't login to my gov gateway account because they've deleted my old login details and I don't have two of the three proof of identification required to set up new login details

[RobertT]

There's three important things to remember with the state pension:

1. The headline figure of 35 years needed to get the full rate only applies to people who started their working life after 6th April 2016, which was when the new/current system started.

2. Anyone who worked before that will either have all their entitlement before 2016, or a mixture of both. Those people might need more or less than 35 years due to contracting out and their individual NI record.

3. Contracting out of the state second pension(S2P) might mean you get less than you thought. But the whole point of it was that you were building up at least as much via your workplace pension that you would have got via S2P.
If you'd been contracted in to S2P, you wouldn't have been able to join the RM pension at all.
Therefore I would hazard a guess, you'll be getting a lot more from RM than you're losing in state pension.

[Mike G]

So when we were contracted out were we paying lower NI contributions as a result of being contracted out?

If I'd not joined any of the RM Pension schemes would I have been paying higher NI contributions?

[RobertT]

So when we were contracted out were we paying lower NI contributions as a result of being contracted out?

If I'd not joined any of the RM Pension schemes would I have been paying higher NI contributions?

Yes, on both counts.

Contracting out is seen by many as a bad thing, but that's usually because they don't understand how it all works.
Most people will actually be better off overall as a result!

Many will end up with the full state pension and their workplace scheme, and the longer they work beyond 2016 the more likely that's going to be the case.

The best of both worlds!

[yellowbelly]

In previous employment I was contracted out for 30 years. So was a bit concerned that I wouldn't receive the max state pension but since joining RM I've worked enough years to get the maximum according to a DWP forecast I got last year, so as RobertT states, everybody's individual circumstances differ.

[yellowbelly]

Thanks for the replies, I had no idea the State Pension was individually tailored and dependent on a various different things related to your work history, I stupidly assumed it was as simple as if you've got x number of qualifying years of making contributions you'll get £xxx per week State Pension!

It seems as clear as mud and an utter scandal, so I might or might not get the level of State pension commensurate with the number of years I was working and making NI contributions.

Just to add to my frustration I can't login to my gov gateway account because they've deleted my old login details and I don't have two of the three proof of identification required to set up new login details

If you're having difficulty in the lost password/login details, what was you first pets middle name loop of doom, in the meantime you can send off form BR19 or ring the Future Pension Centre:

https://www.gov.uk/future-pension-centre

https://www.gov.uk/government/publicati ... -statement

[SeanMc]

Dont forget you can buy any years you are short due to being contracted out. I was short 2 years to get the full state pension but bought them at a cost of £900 per year.

[freespeech]

Dont forget you can buy any years you are short due to being contracted out. I was short 2 years to get the full state pension but bought them at a cost of £900 per year.

Not "any" years.....you can only buy back up to the previous six years.

[yellowbelly]

There is of course the caveat (when you view your state pension forecast on line) that the forecast is (paraphrasing):

'Not guaranteed'

'Based on current legislation'

Gulp!

[TopperGas]

In previous employment I was contracted out for 30 years. So was a bit concerned that I wouldn't receive the max state pension but since joining RM I've worked enough years to get the maximum according to a DWP forecast I got last year, so as RobertT states, everybody's individual circumstances differ.

Contracting out doesn't effect your state pension it relates to the additional "state second pension", I also contracted out for a number of year and I haven't a clue if I'm better off or worse off having done so!

One of the benefits of the second pension is that I can take a 25% lump sum tax free or even take the whole pension and pay the appropriate tax but if I'd stayed in the state scheme I'd just receive a monthly pension payment.

[yellowbelly]

Contracting out doesn't effect your state pension it relates to the additional "state second pension", I also contracted out for a number of year and I haven't a clue if I'm better off or worse off having done so!

One of the benefits of the second pension is that I can take a 25% lump sum tax free or even take the whole pension and pay the appropriate tax but if I'd stayed in the state scheme I'd just receive a monthly pension payment.

Doubt a lot of people know there's a between state pension and the second state pension element but you're correct.

The theory was the second state pension and your contracted out pension should be at least equivalent at the end of the day but with the possibility of increased investment returns on your contracted out pension (and you paid less NI).

If your current DWP forecast (if you've got one) indicates you should get the max DWP amount at your retirement age then you're probs better off as you've got your contracted out 'second' pension as well.

[TopperGas]

Contracting out doesn't effect your state pension it relates to the additional "state second pension", I also contracted out for a number of year and I haven't a clue if I'm better off or worse off having done so!

One of the benefits of the second pension is that I can take a 25% lump sum tax free or even take the whole pension and pay the appropriate tax but if I'd stayed in the state scheme I'd just receive a monthly pension payment.

Doubt a lot of people know there's a between state pension and the second state pension element but you're correct.

The theory was the second state pension and your contracted out pension should be at least equivalent at the end of the day but with the possibility of increased investment returns on your contracted out pension (and you paid less NI).

If your current DWP forecast (if you've got one) indicates you should get the max DWP amount at your retirement age then you're probs better off as you've got your contracted out 'second' pension as well.

I always assumed if I'd stayed in the Government scheme I'd get an additional SP2 payment on top of the standard DWP forecast.