/ Money

Do you understand your state pension forecast?

Pension pot savings

Following a Which? investigation into state pension forecasts it’s clear to us that the Department for Work and Pensions still has improvements to make.

I’m a fair way off qualifying for the state pension, but I was curious to see an estimate.

I’d say that the information in the paper and online statements I received was broadly useful. However, there were some key omissions.

State pension forecast

First, although they cover your National Insurance (NI) record to some degree, what this means and what you can do to plug any gaps is largely absent.

Secondly, your contracting-out record must be used to work out your state pension and ‘Contracted Out Pension Equivalent’ (COPE) estimates. (Before 2012, you could contract-out, or choose not to make contributions to a second, top-up pension, provided by the government.)

COPE is an estimated figure used to give you a rough idea of what you’re likely to get from other pensions, if you’ve opted out of the additional state pension. But the workings aren’t shared, and there’s no way of checking the DWP’s (Department for Work and Pensions) sums.

HM Revenue & Customs (HMRC) says that if you want to know whether you were contracted out, you should contact your pension scheme provider or employer. But this could take a great deal of time and effort, particularly if you’ve had several employers and some no longer exist.

Overall, this system isn’t all that clear and the confusion could lead people to question the accuracy of DWP’s calculations.

We think people need detailed contracting-out information to help them understand their state pension entitlement.The DWP should include this information on both your paper and online statements – and soon.

Working out your state pension

In fact, we think there’s still much more that could be done to improve pension forecasts.

In a separate piece of research we carried out earlier this year, we found that over a third of people approaching retirement age find it difficult to keep track of their pension pots. So we were pleased to see the Treasury back our call for a ‘Pensions Dashboard’ to be delivered by the industry by 2019, this will house all the information necessary to help savers make informed decisions about their retirement choices.

If you want to find out what your state pension forecast is there are a number of ways you can do so. HMRC provides an online service, it takes about 10 minutes and you’ll need to confirm your identity and provide your NI number.

Or if you’re over state pension age or reach it in less than 30 days, you can get a paper statement from the Pension Service. And if you’re retirement date is further off then you can contact the Future Pension Centre.

Have you seen your state pension forecast? Did you find your forecast confusing at all?

This investigation originally appeared in the September 2016 edition of Which? Money.

Comments
Guest

How can I make up my pension deficit? Having just read this question in the October magazine I found the answer from Joanne puzzling. I will receive my state pension in November under the new rules and will also receive less than the full state pension of £155.65 due to contracting out. Can I also make Class 3 voluntary contributions to reduce the deficit? If so how much and for how long? My deficit is £28 per week. I have researched this on the Internet but posts refer to the old pension scheme.

Guest

YB – have you visited – gov.uk/government/publications/additional_state-pension-top-up –?

Guest

I used the online forecaster and was told that I’d get £164.32 a week in April 2017. This appears to be more than the full pension and they also say they have made a deduction for contracting out. How can this be? I will have 42 years of contributions by then but I didn’t think that anything over 30 or 35 counted.

Guest

I tried to claim my state pension online several months ago but when nothing happened I decided to call DWP a few days ago. It was very straightforward and I will receive less than £120 per week, presumably because I was contracted out. 🙁

Guest
Paul Newnham says:
4 June 2017

I am 51 and I have just gone online for a state pension forecast. It say i will receive the full amount of the New State Pension, 159.55, if i pay in for another six years (which i more than likely will).

Later in the forecast it says my COPE (Contracted Out Pension Equivalent) estimate is £40.04.

Do i need to deduct the COPE amount £40.04 from the £159.55 to arrive at the figure i will receive? i.e £119.51.

Guest

I think you should check that out with the Department of Work and Pensions, Paul. At the very least that statement is open to misinterpretation and although I think I know what it means I would hesitate to comment without confirmation from the DWP.

Guest

Seemingly Paul the government has presented no simple answer other than you will get less than the full amount ,even gov.uk dont give scales or figures for this calculation . Have a read of this is money financial website : http://www.thisismoney.co.uk/money/experts/article-3143386/How-flat-rate-state-pension-contracted-out.html

Guest

Duncan is right, but what you lose on the swings you might gain on the roundabout if the additional occupational pension provided by your employer matches or exceeds the COPE amount you have been quoted. ‘Contracting Out’ compensated people for paying more into a non-state pension for enhanced benefits as it relieves the state of some costs in retirement. As the article states, it is necessary to look at the whole picture taking your state pension and occupational pension together and it also advises checking your personal position with the DWP and I certainly think you need that clarification as there are various potential complications referred to in the article.

The article also says that formal state pension forecasts from the DWP are currently only available to those within ten years of state pension age, and at 51 you have some years to go before a firm projection will be available to you. Make a note in your forward planner to re-check your position when you are within ten years of your state pension entitlement date.

Guest
Robin says:
21 July 2017

The Gov. Pensions website has told me of my intended pension amount when I reach retirement age in 6 years time. All well and good. It also tells me of the COPE amount I will get. My question is….As I am receiving my Company pension just now , is the COPE amount already in it , or will it be paid along with my Company pension on my state retiral age ?