Contracted out of the Additional State Pension

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1. What contracting out was

Under the State Pension rules before 2016, you or your workplace or private pension scheme could choose to 鈥榗ontract out鈥� of the Additional State Pension. The Additional State Pension was also known as State Second Pension or 鈥楽ERPs鈥�.

This guide is also available in Welsh (Cymraeg)

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

Check how contracting out affects your amount.

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.

2. How contracting out affects your amount

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鈥檙e 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 拢221.20 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 拢6.32 a week to your new State Pension. You can read more detailed information about how this is calculated in 鈥榊our new State Pension explained鈥�.

Examples of how contracting out might affect you

The amount of State Pension you鈥檒l get will vary depending on how many years you were contracted out.

Example 1

Sam鈥檚 State Pension age is expected to be 67. They were contracted out which has reduced their estimated State Pension to 拢200 per week. This is less than the full rate of State Pension.

Sam is still working and paying National Insurance which adds more qualifying years to their record. Each qualifying year they add is worth 拢6.32 per week. This means the 拢21 deduction will be cancelled out by adding 4 more qualifying years before they reach State Pension age.

Example 2

Jo is 60 years old and they have just stopped working. They were contracted out which reduced their forecast State Pension to 拢170 per week. They will reach State Pension age at 67.

Jo could choose to pay 7 years of voluntary National Insurance contributions, to get qualifying years when they are not working. Each additional qualifying year will increase their amount by 拢6.32 per week, but Jo will not reach the full rate of the new State Pension.

3. 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鈥檝e lost contact with a pension provider, the Pension Tracing Service might be able to find their contact details.