Why don’t you get your full state pension – even though you’ve worked all your life

Despite working for decades, some people may find they are not receiving the full state pension. Pensions minister Sir Steve Webb explains why – and what you can do about it

Former pensions minister Sir Steve Webb
Former pensions minister Sir Steve Webb explained

Full new state pension is £179.60 a week, but even if you’ve worked your whole life, your payment could be deducted – which can be alarming.

The good news is that there is a clear explanation for this and it all has to do with the pension terms you’ve agreed to during your working life.

In most cases it is linked to the ‘cutting out’ of the state pension – the period in which individuals are members of a company or private pension is used to replace part of the salary their retirement pension scheme.

These deductions have many confusing names – COD, COPE, and GMP among others.

Simply put, contracting through a salary-linked pension, means that workers and employers benefit from a reduction in the NI contribution rate.

In return, the occupational pension scheme must replace part of the state pension (SERPS or earnings-related factor) that workers should have accrued.






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From 1978 to 1997, the amount the scheme had to offer instead of the SERPS pension was known as the ‘guaranteed minimum pension’ or GMP.

Contracts with individual pensions lasted from 1988 to 2012 and worked in a different way.

Workers benefit from a refund of NI contributions that have been paid into a personal pension and invested. Whether the retirement pension generated by that amount is higher or lower than the forfeited state pension depends on things like the investment performance of the pot and the annuity rate in retirement.

Most people in this pension category will have a deduction from their state pension which doesn’t quite match private pension they are built to replace; In some cases, the deduction will exceed the accumulated private pension.

Although outsourcing was abolished for salary-related pensions in April 2016, outsourcing is still reflected in the calculations for the new state pension.

But those with contribution years from 2016/17 on can gradually ‘spend’ all of their former contract deductions; they could end up creating a brand new fixed rate pension in addition to their contracted pension.

But in the early years of the new plan, deductions for previous contracts can still keep them from reaching the full flat rate, even if they have 35 or more years of NI contributions.

In the case of occupational pensions, the decision on whether to contract or not is made by the scheme, not by the individual member.

This is why many people say they don’t remember deciding whether or not to contract – they are simply joining a pension scheme which is taken on a contracted basis.

State pension projections now contain the figure ‘COPE’ – contracted pension equivalent; This is an indication from the government about an occupational or personal pension that an individual may receive from a contractual pension arrangement.

However, this is a “memo item” and has been used to calculate the state pension.

People do not need to do additional calculations with COPE when they receive their state pension statement.

The LCP has a guide to help you understand how this affects you and whether your pension is correct, this.

If you have a pension short, you may be eligible for a supplement as retirement credit – see how to apply here.

Many women have also been paid the wrong state pension because of the DWP error – see if it affects you, here.

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https://www.mirror.co.uk/money/youre-not-getting-full-state-26299985 Why don't you get your full state pension - even though you've worked all your life

Fry Electronics Team

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