Contracted out of the Additional State Pension

Members, when they applied for State Pension have only found out then that as a result of contracting out, their pension will not be paid at a rate they expected with some paying thousands of pounds in missed National Insurance contributions to boost their state pension.

Background 

Under the State Pension rules before 2016, you or your workplace or private pension scheme could choose to 'contract out' of the Additional State Pension. The Additional State Pension was also known as State Second Pension or 'SERPs'. 

If you were contracted out of the Additional State Pension, some of your National Insurance contributions were either:

• lower than people who were not contracted out
• paid into another pension, for example a workplace or private pension.

All contracting out stopped on 5 April 2016. After this, all National Insurance contributions are at the standard rate until you reach State Pension age. 

How does this impact on members? 

How your State Pension amount is affected depends on when you reach State Pension age. 

If you reached State Pension age before 6 April 2016

You might not get any Additional State Pension, or get a small amount, from the time you were contracted out. You still get the basic State Pension if you were contracted out. If you are on a low income you can apply for Pension Credit. 

If you reached State Pension age on or after 6 April 2016 

If you were contracted out before 6 April 2016, you might not get the full rate new State Pension of £241.30 a week. An amount is taken off your new State Pension if you were contracted out. This is because either: 

• you paid National Insurance contributions at a lower rate
• some of the National Insurance contributions you paid were used to contribute to a workplace or private pension. 

How much is taken off depends on how long you were contracted out and your earnings at the time. While you were contracted out, you were paying into your workplace or personal pension instead. 

Increasing your State Pension

You might be able to increase your State Pension by adding qualifying years onto your National Insurance record. 

Each full qualifying year from 5 April 2016 until you reach State Pension age will add about £6.89 a week to your new State Pension. You can read more detailed information about how this is calculated in 'Your new State Pension explained'. 

Check if you were contracted out

Most people who were employed before April 2016 were contracted out at some point. 

Check your payslips from before 6 April 2016. If you have any payslips with the category letters D, E, L, N or O, then you were contracted out. 

You can also ask:

• your employers
• your pension providers 

If you have lost contact with a pension provider, the Pension Tracing Service might be able to find their contact details.