One of the most common reasons people’s new State Pension forecast is lower than the full amount is a history of contracting out. Understanding what contracting out was, how the COPE deduction works, and what you can do about it is essential for anyone whose State Pension forecast shows a starting amount below the full new State Pension.
A Brief History of Contracting Out
| Period | Scheme | What happened |
|---|---|---|
| 1978–2002 | SERPS | Employers could contract employees out of SERPS, paying reduced NI, and contributing to an occupational DB scheme or personal pension |
| 2002–2016 | S2P (State Second Pension) | Contracting out continued for DB occupational schemes (closed for defined contribution from 2012) |
| 6 April 2016 | S2P abolished | Contracting out ended for all schemes; new State Pension introduced |
During contracted-out periods:
- You (or your employer) paid lower NI contributions (the “contracted-out rebate”)
- The rebate was directed into your private pension scheme instead
- You did not build up SERPS/S2P entitlement during those years
The Starting Amount Calculation
When the new State Pension launched on 6 April 2016, HMRC calculated a “starting amount” for everyone who had not yet claimed their State Pension, using whichever was higher of:
- Old rules calculation: Basic State Pension (proportional to NI years) + Additional State Pension built up (SERPS/S2P), minus Contracted-Out Deduction (COD)
- New rules calculation: Number of qualifying NI years × (Full New State Pension ÷ 35) — with no deduction for contracting out
The higher of these two figures became your starting amount on 6 April 2016.
Understanding COPE
COPE (Contracted-Out Pension Equivalent) appears on your State Pension forecast on GOV.UK. It shows the reduction in your starting amount that results from contracted-out periods.
Important: COPE is not money you have lost. It represents the value of the pension you built up in your contracted-out private pension scheme instead of in SERPS/S2P. Your private pension should be larger to compensate.
Example:
- New State Pension (full): £230.25/week
- Your starting amount (after COPE deduction): £180.00/week
- COPE: approximately £50.25/week
- This means your contracted-out pension scheme should provide approximately £50.25/week (or equivalent capital value) to make up the difference
How to Increase Your State Pension Above Your Starting Amount
Additional qualifying NI years earned after April 2016 increase your State Pension:
- Each additional qualifying year adds approximately £6.59/week (£230.25 ÷ 35)
- You can accumulate additional years through employment, NI credits, or voluntary contributions
- The maximum is capped at the full new State Pension amount (£230.25/week in 2026/27)
- Years above 35 total (including pre-2016 years) are only valuable if they push you above your starting amount
Worked example:
- Starting amount (post-COPE): £180/week
- Years needed to reach full pension: (£230.25 - £180) ÷ £6.59 = ~7.6 years post-April 2016 qualifying years
- If you have 7 qualifying years since April 2016: State Pension = £180 + (7 × £6.59) = £226.13/week
- One more year brings you to approximately full pension
Checking Your Forecast
The GOV.UK State Pension forecast service (gov.uk/check-state-pension) shows:
- Your starting amount
- How many qualifying years you have post-April 2016
- What you are projected to receive at State Pension age
- Whether buying voluntary NI contributions would increase your pension