State pension payments may be affected if you were ‘contracted out’

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State pension payments can vary according to a person’s National Insurance contributions. Typically, people need 35 years of qualifying contributions for the full new state pension, and 30 years for the full basic state pension.

When it comes to being contracted out, these rules only apply to the older scheme: the basic state pension.

Under older state pension rules, individuals were able to contract themselves out of the Additional state pension.

Originally, the scheme was called the State Earnings Related Pension Scheme, or SERPS as it was commonly known at the time.

This was before it became the state second pension (S2P) in 2002.

With this scheme, individuals may have paid lower National Insurance contributions.

Instead, they could have paid into an earnings-related pensions scheme, workplace, personal or stakeholder pension.

The Government states being contracted out of the Additional state pension will “affect most people who have been in work”.

Contracting out ended in April 2016, but a person’s history will affect how much state pension they receive.

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From April 6, 2016, individuals will no longer be contracted out.

As a result, they will pay more National Insurance – the standard amount.

Some individuals may not know if they were contracted out, but fortunately there is a way to check.

Individuals may wish to contact their pension provider for more information regarding the matter.

If they have lost touch with an old scheme, the Pension Tracing Service may be able to help.

In addition, a person’s old payslips may hold the simple key to finding out their status. 

People were contracted out if the National Insurance contributions line has the letter D or N next to it.

If it has a letter A, then they were not contracted out.

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Those who have any different letter should check this with their employer or pension provider.

Certain people are more likely to have been contracted out than others.

These include those working in the public sector, for example: 

  • The NHS
  • Local councils
  • Fire services
  • The civil service
  • Teaching
  • Police forces
  • The armed forces

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