I DON’T GET FULL STATE PENSION THOUGH I PAID IN 46 YEARS OF NI – WHY? PAUL LEWIS REPLIES

Are you in financial agony? Ask Paul Lewis, broadcaster and our new financial agony uncle. Is there something you’ve always wanted to know but don’t understand? Do you need to know your rights in a situation? Have you been in a situation where you think you’ve been ripped off?

Paul can help. He can’t take on individual cases or try to force firms or the Government to be reasonable. But you can send all those questions about things that puzzle you involving money to Paul at [email protected] and he will answer some of them in this column. Remember, it’s your column so get those questions coming in.

Peter from Norfolk writes: I have a printed Government statement saying I have 46 years of full National Insurance (NI) contributions and just six years where I apparently fell short. However, I still do not get a full state pension. My new state pension on 9 April 2025 will be £181.58. Can you tell me why? Secondly, I did not receive my state pension until I was 65 and a half. Again, why? I was born on 17 March 1954.

I have contacted the pensions department and they have said they are correct, but I am confused.

Paul replies: You and countless others are confused by the almost impenetrable rules surrounding the state pension.

Let me deal with the pension age first. As you may know, the current pension age is 66. It rose from 65 to 66 in stages, and your birthday fell halfway through that change. You reached state pension age on 6 September 2019 when you were a shade under 65 and a half. If you had been born three weeks later on 6 April, you would not have reached pension age until 6 November.

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So that is the first puzzle solved. You are young enough to be entitled to the new state pension and the full amount of that rises to £230.25 a week from 7 April. Yours, though, will be just £181.58 – nearly £49 a week less. Naturally, that puzzles you – and annoys you too, I expect! Not least because you paid NI contributions for a lot more than the 35 years needed to get a ‘full’ state pension. So why is yours less?

The answer is that for much of your working life, you were in the army, earning a Ministry of Defense pension, which is based on your pay when you stopped being a soldier. People who paid into these good pensions – called final salary schemes or sometimes ‘defined benefit’ or DB schemes – paid a lower rate of NI contributions on their wages in work.

They did not pay into the State Earnings Related Pension Scheme (SERPS) which boosted the old state pension with an extra earnings-related amount – called now additional pension. It was called being ‘contracted out’ of SERPS.

When the new state pension was introduced in April 2016 the government decided it would not be fair to give people who had not paid into SERPS the same higher new pension as people who had – those who had paid more in should get more out. So it deducts an amount from the new pension for every year people paid into a good pension at work.

It says that is fair because instead of that additional state pension, you get a pension from your job in the army and part of that is supposed to replace the SERPS you do not get. The Government call it ‘Contracted Out Pension Equivalent’ or COPE and it is that amount which is deducted from your new state pension.

In your case it is a deduction of more than £48 a week taking your new state pension to not much more than the old state pension would have been.

About 1.5 million people who reach state pension age before April 2027 will face this deduction from their new state pension. Of course, they find it confusing because, like you, most will have paid at least the 35 years of NI contributions that is supposed to be enough to earn a ‘full’ state pension. And you are all entitled to a full pension. But that is before the second stage of the calculation – deducting the COPE.

How to buy back the amount deducted from your pension

If you thought that was complicated, wait for the next bit! People in your position might be able to buy back the amount that has been deducted from their pension. Every year of NI contributions you pay from April 2016 to the year before you reach state pension age will buy back a bit of their reduced pension.

You reached state pension age in 2019/20. So if you paid NI contributions in the three tax years before that – 2016/17, 2017/18, 2018/19 – that will reduce the COPE deduction – in other words, make your pension bigger.

You tell me you did not work in those years after taking early retirement, so you didn’t pay NI contributions at work. But you can buy them now to boost your pension.

And when I say ‘now’ I mean right NOW – don’t hesitate. Because the opportunity to do that ends on Saturday 5 April. In a slight concession the Government says anyone who fills in the call back request form on this web page www.gov.uk/future-pension-centre by 5 April will be in time even if the callback does not happen for a month or two.

Each year you buy will cost you £824.20, but for that, your pension will be boosted by £6.57 a week or £342 a year, so the payback is rapid.

Peter, I am not going to apologise for the rules being so complicated because I did not invent them! But I hope my explanation makes some sense. And please take action now – NOW – to boost your pension by £19.73 a week, though it will still be less than the full £230.25.

More information on my blog paullewismoney.blogspot.com search ‘Target 221’

2025-03-27T06:55:11Z