State Pension
    Complex Topic Simplified

    Contracting Out and COPE

    Understanding how contracting out of the additional State Pension affects your new State Pension amount, and why our simplified calculator doesn't include these complex calculations.

    Use Simplified CalculatorGet Official Forecast

    What Was Contracting Out?

    Contracting out was a way for people to opt out of the additional State Pension (SERPS, later S2P) and instead build up pension benefits in a workplace or personal pension scheme. In return for giving up some State Pension entitlement, both you and your employer paid reduced National Insurance contributions.

    Workplace Schemes

    Many final salary and some money purchase workplace pension schemes contracted their members out of the additional State Pension.

    Personal Pensions

    Some people chose to contract out through personal pensions or stakeholder schemes, particularly in the 1980s and 1990s.

    Key Dates and Changes

    • 1978-1997: SERPS (State Earnings Related Pension Scheme) operated
    • 1988: Personal pension contracting out introduced
    • 1997-2016: S2P (State Second Pension) replaced SERPS
    • 2012: Contracting out through personal pensions ended
    • 2016: All contracting out ended with the introduction of the new State Pension

    What is COPE?

    COPE stands for "Contracted Out Pension Equivalent." It's the amount your new State Pension starting amount may be reduced by if you were contracted out of the additional State Pension. Essentially, it represents the additional State Pension you gave up by contracting out.

    How COPE Affects Your Pension

    If you were contracted out, your new State Pension starting amount is calculated as your "foundation amount" minus your COPE amount. The foundation amount is based on your National Insurance record up to April 2016, and the COPE amount represents the additional State Pension you gave up.

    Why This Matters for Your Pension

    Impact on New State Pension

    If you were contracted out, you might:

    • Have a lower new State Pension starting amount due to COPE deductions
    • Need more than 35 qualifying years to reach the full rate
    • Have transitional protection if your old system pension would have been higher
    • Need to check your workplace or personal pension to see the benefits you received instead

    Checking Your Position

    To understand how contracting out affects your specific situation, you need to get an official State Pension forecast from the government. This will show your COPE amount and explain how it affects your pension.

    Types of Contracted Out Schemes

    Final Salary (Defined Benefit) Schemes

    These schemes promised to replace the additional State Pension with a guaranteed pension based on your salary and years of service. Most provided better benefits than the State Pension they replaced.

    Money Purchase (Defined Contribution) Schemes

    These schemes built up a pension pot that was invested. The pension you get depends on contributions made, investment growth, and annuity rates when you retire.

    Personal Pensions

    Individual pension contracts where the rebated National Insurance contributions were paid into your personal pension pot. The value depends on contributions and investment performance.

    Why Our Calculator Simplifies This

    Calculating the exact impact of contracting out requires access to:

    • Your complete National Insurance record from 1978 onwards
    • Details of which years you were contracted out and through which schemes
    • Complex calculations involving SERPS and S2P accrual rates
    • Revaluation factors applied to different periods
    • Comparison with what you would have received under the old system

    Our calculator provides a simplified estimate based on the new State Pension rules, assuming you weren't contracted out. This gives you a useful baseline, but you should get an official forecast for your exact situation.

    Getting Accurate Information

    Official Resources

    Check your State Pension (includes COPE information)DWP State Pension fact sheets

    Planning Considerations

    If you were contracted out:

    • Check your workplace or personal pension benefits - these should compensate for the reduced State Pension
    • Consider whether it's worth paying voluntary National Insurance contributions to build up your State Pension
    • Get professional advice if you're unsure about your pension arrangements
    • Use the official government service for accurate forecasts

    Frequently Asked Questions

    How do I know if I was contracted out?

    Check your State Pension statement through the official government service. It will show your COPE amount if you were contracted out. You can also check old payslips for reduced National Insurance rates.

    Will contracting out reduce my State Pension?

    It may reduce your new State Pension starting amount, but you should have compensating benefits in your workplace or personal pension. The overall position depends on your specific circumstances.

    Can I still be contracted out now?

    No, contracting out ended in April 2016 when the new State Pension was introduced. Everyone now builds up pension under the same system.

    Why doesn't your calculator include COPE?

    COPE calculations are extremely complex and require access to your complete National Insurance record. Our simplified calculator provides a baseline estimate - use the official government service for exact figures.