State Pension Forecast is COPE deducted from your forecast?

[tlf67482]

I am getting really confused by my State Pension forecast. I use the online service to view my figures. I have adjusted the figures below to make them easier to read and assuming the rules do not change.

On the "Your State Pension summary" it says
Estimate based on your National Insurance record up to 5 April 2018 is £100 a week

If I then click on "You were contracted out of part of the State Pension" it says Your COPE estimate is £20 a week. This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.

Assuming I make no further contributions when my state pension is paid will this mean I am only paid £80 (£100-£20) even though it says the COPE estimate of £20 a week will not affect my forecast?

Thanks

[Chrysalis]

No, as it says, your forecast is unaffected. You have accrued £100 state pension so far (presumably you have time to make further contributions?)
I agree that it is potentially confusing. The COPE figure is notional only. When you contracted out, you were accruing entitlement to basic state pension only, and some of you NI was diverted into another scheme. That’s where the notional £20 will be paid. You will have accrued less entitlement to state pension than otherwise, but hopefully you still have time to accrue the maximum state pension (£168 per week at present) so won’t be any worse off.

[ursaminortaur]

No, as it says, your forecast is unaffected. You have accrued £100 state pension so far (presumably you have time to make further contributions?)
I agree that it is potentially confusing. The COPE figure is notional only. When you contracted out, you were accruing entitlement to basic state pension only, and some of you NI was diverted into another scheme. That’s where the notional £20 will be paid. You will have accrued less entitlement to state pension than otherwise, but hopefully you still have time to accrue the maximum state pension (£168 per week at present) so won’t be any worse off.

The state pension changed in 2016 when they basically combined the basic state pension with the second state pension (known at various different times as SERPS or S2P). The second state pension was earnings related and could be opted out from when someone was contributing to a personal pension or was in a DB pension (where the rules of the DB pension generally required opting out). When opting out reduced NI contributions were paid but money was also paid into the individual's non-state pension scheme. The COPE arises because of the lower NI that was paid and resulting lack of second state pension that was built up. The government wanted to ensure that people wouldn't lose out because of the switch so calculated a starting value for the new state pension in 2016 which was the larger of what you got under the old system and what you would get under the new system. The calculation of this starting value under the new system took account of the individual being opted out by making a deduction known as COPE. NI contributions after 2016 would then build on this 2016 starting amount when calculating your new state pension.
So COPE is only relevent for calculating that 2016 starting amount and only if the amount calculated despite the COPE deduction was larger under the new system than what had been built up under the old system. Unless that starting amount has to be changed because for instance you were to fill in gaps in your NI contributions from prior to 2016 which changed the calculations then you can ignore COPE going forward.

[Chrysalis]

Thanks for that (much) fuller explanation.
I wish they’d just stop putting the COPE on the state pension forecast. It just confuses. They could say something else, like ‘if you have been contracted out, you may need to continue paying NI contributions for longer to accrue the full new state pension’.

[mc2fool]

I wish they’d just stop putting the COPE on the state pension forecast.

Then folks would find it (even) more difficult to work out how their starting amount, and hence forecast state pension, was arrived at, if not impossible.

Methinks what's needed is more information, not less, and possibly some changes to the presentation, although IMO, the OP's confusion notwithstanding, I think it's pretty clear that the COPE "will not affect your State Pension forecast", and the "find out more" link on that page takes you to a detailed explanation of what ursaminortaur has summarised.

But there does seem to have been a consistent trend of dumbing down the state pension forecast over the years, and I wouldn't be surprised to see it end up as just the one number with a "that's it".

in the "good ol' days" pension forecasts provided a full breakdown and detailed explanations of each component, as well as information on how to boost it and your choices when the time came. E.g. I have ones from 1992 & 2010 that both run to 6-7 pages each and both detail and explain my BSP, gross ASP, COD, net ASP & GRB figures. The explanations are specific to my case and figures (not just generalised ones) and the forecasts are very informative.

Then I have a 2 page one from January 2015 that specifies just my "estimated starting amount" for April 2016 and gives only the amounts under the new and (then) existing rules and says my estimated starting amount will be the higher of the two. There are no COPE figure in this forecast and no breakdown at all on how the two new/existing figures were arrived at.

Then another 2 page one from July 2016 which gives just the "what you'll get" figure, again without any breakdown or explanation as to how it's arrived at, with no mention of old/new figures, although it does list the COPE.

All of them did come with a booklet, which gives generalised explanations, but only the 1992 & 2010 ones had breakdowns and explanations of my figures.

[tlf67482]

At least for me with the information they currently put on the page I would prefer more detail on the forecast. It seems like they have the actual values like Starting Value, COPE value behind the scenes they should put all on a page spelling out / explaining how everything has been calculated.

So if it says "Forecast if you contribute another X years before 5 April 2046 = £168 / week" as long as you contribute X more years you can totally ignore the COPE figure you will have a full state pension of £168 / week?

Thanks for replies really helpful.

[mc2fool]

So if it says "Forecast if you contribute another X years before 5 April 2046 = £168 / week" as long as you contribute X more years you can totally ignore the COPE figure you will have a full state pension of £168 / week?

Yes.

[goRt]

Just remember that the online estimate should not be relied upon and a paper copy should be requested.

So if it says "Forecast if yo contribute another X years before 5 April 2046 = £168 / week" as long as you contribute X more years you can totally ignore the COPE figure you will have a full state pension of £168 / week?

Yes.

[mearnsfool]

Just remember that the online estimate should not be relied upon and a paper copy should be requested.

Not true!

Both the online statement and the paper statement that are requested at the same time will be the same value.

The DWP are very clear in their warnings that these are estimates only.

The only thing the DWP will stand by is the state pension forecast you get after you request your state pension. There are further time consuming checks done for that and these extra checks are not done for the paper or online forecasts you request prior to this.

The DWP will also change your state pension after retirement, if during their ongoing audit, information comes up that was not available when your state pension was calculated just before you are receive your state pension award letter.

[Alaric]

At least for me with the information they currently put on the page I would prefer more detail on the forecast. It seems like they have the actual values like Starting Value, COPE value behind the scenes they should put all on a page spelling out / explaining how everything has been calculated.

COPE and GMP can be effectively the same thing, but one is stated as a weekly amount and the other as annualised.

A bottom line is that if you were contracted out, you may get a lower State pension, but a higher private one, or cash equivalent.

[swill453]

A bottom line is that if you were contracted out, you may get a lower State pension, but a higher private one, or cash equivalent.

Yes, as you approach the age of 67 your pension statement could still be saying you're due a COPE of £XX per week, even if you spent it all on a Lamborghini when you were 55

Scott.

[mc2fool]

COPE and GMP can be effectively the same thing, but one is stated as a weekly amount and the other as annualised.

That depends on who you talk to. If you query what HMRC has as your GMP they'll quote it to you as a weekly amount. (It's DWP that called it COD, contracted out deduction, in pension statements).

The other thing to note about the COPE is that it is the 2016 figure that went into deciding your 2016 "starting amount", and not the amount of GMP you will get from your contracted out pensions when you reach GMP age; that should be more for most folks, so it's an "at least" figure.