WHAT IS CONTRACTING OUT? The Additional State Pension was often called ‘SERPS’ or the State Second Pension.
Some people got contracted out of the State Pension. That meant their National Insurance contributions would have been either:
- Less than the standard contributions paid into the Additional State Pension.
- Paid into a different pension altogether (e.g. a private pension).
Note: There are several ways to check if you got contracted out (see the section below).
How Contracting Out affects Your Pension
Those who got contracted out from the Additional State Pension in the past may get a lower State Pension. It depends most when you reach State Pension age. Was it before the 6th of April 2016 or was it on or after 6th of April 2016?
Pension Changes 2016 Contracted Out
The contracting out rules changed on the 6th of April 2016. Since then, those who were contracted out will:
- Pay more in National Insurance contributions (i.e. the standard amount of NIC).
- Stop being contracted out.
Contracted Out: Basic and Additional State Pension
People are eligible to get the basic State Pension if they reached State Pension age before the 6th of April 2016. This still applies to those who got contracted out. People on low earnings may also get some of the Additional State Pension.
People with a Workplace, Personal or Stakeholder Pension
What if you got contracted out of the Additional State Pension due to a workplace, personal, or a stakeholder pension? In this case you would either:
- Have paid lower National Insurance contributions.
- Have had some of your NIC put towards to the workplace, personal, or stakeholder pension.
Contracted Out: New State Pension
Those who qualify can apply for the new State Pension. That means you are either a man born on or after 6th of April 1951 or a woman born on or after the 6th of April 1953.
The starting amount for the new State Pension can include a deduction. The deduction applies to those who got contracted out from:
- Some earnings-related pension schemes at work before 6th of April 2016 (e.g. a final salary or career average pension).
- Certain workplace, personal or stakeholder pensions before the 6th of April 2012.
People with a Workplace, Personal or Stakeholder Pension
What if you got contracted out of the Additional State Pension due to a workplace, personal, or a stakeholder pension? In this case you would either:
- Have paid lower National Insurance contributions.
- Have had some of your NIC put towards to the workplace, personal, or stakeholder pension.
Check Contracted Out Status
One way to find out if you were ‘contracted out’ is to check your old payslips. If your National Insurance category has either a D or N – you contracted out. If it has the letter A you were not contracted out. You can also ask your employer to check for you.
As a rule, if you worked in the public sector you would have been ‘contracted out’. Typical examples include:
- Local council worker
- State School teacher
- The fire service
- The civil service
- The National Health Service
- The police force
- The armed forces
Note: You can find pension contact details online, by phone, or by post. The Pension Tracing Service may help you find the pension provider for a workplace or personal pension scheme.