GOV.UK – New state pension: If you have withdrawn from the supplementary state pension For many years, many companies have been offering their employees a company pension to supplement their state pension. In 1978, the government introduced its own supplementary pension, commonly known as SERPS – the state income-based pension system. This has created a potential for dual benefits, with workers paying social security to build a pension based on state income, and also contributing to a pension based on their employer`s income. To eliminate this potential duplication of work, pension systems were allowed to be “outsourced” from the SERPS. Although the rules for awarding contracts are complex, the basic idea was that as long as the company`s system could guarantee a pension at least as good as the SERPS pension, they could withdraw from their members. In exchange for the company`s ability to provide a pension at least as good as the SERPS, employers and employees of the outsourced plans were allowed to pay a reduced NI contribution rate. The subcontracting ended in April 2016, but your subcontracting history will still affect the amount of state pension you receive under the old and new system. In April 2012, those who were in a defined contribution (DC) scheme were re-contracted and paid Social Security at the full rate. They accumulated a second state pension (S2P) between 2012 and 2016. The COPE concept is less useful for those whose outsourced pension was a personal pension or another “pot of money pension” whose amount depends on how the money was invested. In theory, if a person signed a contract and asked for their NI discounts to go into a personal annuity, that money was invested and grew until retirement to provide a pension equal to the COPE amount. In reality, the personal private pension they receive will be much lower than the COPE number for many people.
This is mainly because the amount of pension you can buy today with a pension pot is much lower than expected when outsourcing took place in the 1980s and 1990s. Full flat-rate pension £175.20Minimum deduction on outsourcing -£50.00SPAS Amount B £125.20 The idea of COPE works best for those who have been affiliated to traditional salary-related occupational pension schemes. Consider the simple case of someone whose (outsourced) company pension has promised to deliver at least £30 a week. You may find that they have received a planned state pension of £145.20 and you may be wondering why they are not getting the full lump sum of £175.20. But their state pension forecasts will also mention a COPE of £30 per week, a reminder that they will receive at least £30 per week from their occupational pension. Overall, therefore, their retirement income is at least the full lump sum of £175.20 and often much more. In 1988, the principle of “outsourcing” SERPS was extended to individual pensions, although implemented in a slightly different way. If a person contributed to an “outsourced” personal pension system, they also received an NI discount. But instead of paying a lower contribution rate, they continued to pay the full NI contributions.
Instead, the NI discount was paid directly into his personal pension fund. GMP This means Guaranteed Minimum Pension and is the portion of your benefits that the RMSPS has to pay because you obtained the state supplementary pension (also known as the second state pension or SERPS) between 1978 and 1997. While you were contractually bound, you did not build up an additional state pension, but the RMSPS agreed to pay you a guaranteed minimum of benefits. As can be seen in Box 1, it can be difficult to understand what “outsourcing” means and how and why it affects your state pension. To clarify, the DWP has begun to include an additional figure in the state`s pension projections. This is the “outsourced pension equivalent” or COPE. Note that this number is for informational purposes only and you don`t have to make any additional calculations or subtract this number from your state pension forecasts – the DWP has already done this for you. If you have an adequate Personal Pension Plan (PAL) or Providers` Pension Plan (ASP) contract, you and your employer have paid the same NI contributions as before, but some of them have been reimbursed. Individuals who are eligible for the state pension before April 6, 2016 will receive less or no additional state pension if they have spent time on contracts, and those who are eligible on or after April 6, 2016 will receive a lower “severance amount.” .
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