How Much Is State Pension If you were Contracted Out – Full Guide

If you’re wondering “How much is state pension if you were contracted out”, you’re not alone. Many people contributed to workplace pension schemes like SERPS or final-salary plans, so their current State Pension may include specific deductions. Understanding these differences helps you know exactly what you’ll receive when retirement arrives.

A contracted‑out pension means your employer deducted extra contributions from your National Insurance, granting you a rebate instead. That rebate affected your eventual State Pension entitlement—and it’s vital to know how that works today. In this post, we’ll unpack the UK State Pension rules, explain contracted‑out calculations, and show you how to work out your claim.

• Contracted-out years count toward the 35-year State Pension requirement.

• Your pension may be reduced due to COPE deductions (NI rebates).

• Although you could receive less, the full state pension in 2025 is £221.20 per week.

• You can boost your pension by paying voluntary NI or deferring.

• To get your whole pension prediction, visit your HMRC Personal Tax Account.

What Does “Contracted Out” Mean for Your UK State Pension?

Contracting out was a government policy that allowed employers and employees to opt out of the additional State Pension (SERPS or State Second Pension). In return, both parties paid reduced National Insurance (NI) contributions, and the employee’s workplace pension promised to match or better what they would have earned from the additional State Pension.

This arrangement ran from 1978 to 2016, covering final salary pensions, money purchase pensions, and private schemes.

📌 Contracting out didn’t mean you weren’t contributing to your pension—it meant your NI was redirected to a different type of scheme.

How Did Contracted‑Out Schemes Work Before 2016?

There were two major types of contracted-out arrangements:

🏛️ SERPS & State Second Pension

• SERPS: Introduced in 1978, it was earnings-related and built up additional pension on top of the basic State Pension.

• State Second Pension (S2P): Replaced SERPS in 2002, offering more generous benefits for low and moderate earners.

When contracted out, you missed out on building these benefits—but got rebates into your workplace scheme instead.

🏢 Final Salary and Money Purchase Schemes

• Final Salary schemes: Promised to match or exceed SERPS using a formula based on your earnings and years of service.

• Money Purchase schemes: Your rebates were invested into a pension pot, subject to investment growth and charges.

When Did Contracting Out End?

Contracting out officially ended in April 2016 when the new State Pension system was introduced. Since then:

• Everyone pays full Class 1 NI contributions.

• There’s no more option to contract out.

• Your pension is calculated under a new flat-rate system, currently £221.20 per week in 2025.

How Is Your State Pension Calculated if You Were Contracted Out?

Key Elements in the Calculation:

1. Number of qualifying years on your NI record (up to 35)

2. Contracted-out deduction (also known as COPE)

3. Starting amount from April 2016

4. New pension built since 2016

What’s the Starting Amount for 2025?

The DWP reviewed everyone’s NI history in 2016 and calculated a “starting amount” for the new State Pension. This compared:

• What you’d have earned under the old system (including any SERPS)

• What you’d get under the new flat-rate system

Whichever was higher became your starting amount—but deductions for contracting out were included in that figure.

How Are Rebates Applied to Your Pension?

Your contracted-out pension equivalent, or COPE, is deducted from your state pension if you were contracted out. This reflects the NI rebate you received earlier in your career.

You earn a qualifying year if you’ve:

• Paid sufficient Class 1 NI contributions through employment

• Paid Class 2 or Class 3 contributions if self-employed or voluntarily contributing

• Received NI credits through benefits like:

  • Jobseeker’s Allowance

  • Employment and Support Allowance (ESA)

  • Child Benefit (for children under 12)

  • Carer’s Allowance

🔧 Even years when you were contracted out count, as long as you met the contribution threshold.

If you have less than 35 years, you can top up your record by:

• Buying Class 3 voluntary contributions

• Claiming backdated credits where eligible (e.g., for past caring responsibilities)

Will I Get Full State Pension if I Was Contracted Out?

In most cases, yes—if you have 35 qualifying years, you will receive the full new State Pension (currently £221.20/week in 2025). But here’s the catch:

• If part of your career was contracted out, you may have a deduction applied to your final amount.

• This means that even with 35 years, you might receive slightly less than the full weekly rate unless you’ve built up additional entitlement since 2016.

What Is the Contracted Out Pension Equivalent?

The COPE amount is an estimate calculated by HMRC that shows:

• What you would have earned through the additional State Pension (e.g. SERPS/S2P)

• Minus what you were expected to receive from your workplace or private pension due to contracting out

This value isn’t deducted directly from your State Pension—rather, it’s used in calculating your “starting amount” as of April 2016. If your COPE figure is high, your State Pension may start lower.

Why Do I Have a Contracted Out Deduction on My State Pension?

The deduction exists because during the contracted-out years, you and your employer:

• Paid lower National Insurance

• Redirected contributions to a private or workplace pension scheme

That rebate effectively replaced your entitlement to part of the additional State Pension (like SERPS). So, HMRC ensures there’s no “double payment”—once through your workplace scheme, and again through the State.

Key points about the deduction:

• It’s based on historical rebates and earnings

• It’s not avoidable—but it’s also not a penalty

• It reflects entitlement already earned in another pension pot

• It is updated annually to account for inflation and valuation changes

📌 Your total retirement income should include both your adjusted State Pension and your private pension benefits earned through contracting out.

HMRC Contracted Out Pension

Want to check your record? Visit your HMRC Personal Tax Account. Here you’ll find:

• A breakdown of contracted-out years

• Your “contracted out pension equivalent” figures

• How your deductions were calculated

How Much State Pension Will You Actually Get — Examples

Let’s use two example studies to illustrate this:

Example 1: Someone with 30 Qualifying Years, Fully Contracted Out

• 30 qualifying NI years

• Maximum pension: £189.60 per week (30 ÷ 35 × £221.20).

• Minus contracted-out deduction: final payout ~ £170–£180

Example 2: Mixed Periods (Contracted Out + Standard)

• Ten normal NI years plus 25 contracted-out years equals 35 years.
• Qualifies for full pension: £221.20/week

• But contracted-out deduction might reduce it to around £200–£210/week, depending on rebate values.

Can You Boost a Contracted‑Out State Pension?

Yes—here’s how:

• Voluntary NI contributions: fill gaps if you have under 35 years

• Deferring your pension: for extra cash later

• Top‑up possible: pay voluntary NI to get closer to full entitlement

What’s the Cost to Top Up Gaps?

Filling a few missing years could significantly increase your weekly pension.

Is Deferring State Pension Worthwhile?

Yes! By postponing, you may earn about 4.68% a year for the new State Pension. Deferred adds approximately £10.34 every week for a total of 52 weeks.

What Are the Main Differences: Contracted‑Out vs Standard State Pension?

What Are Common Questions About Contracted‑Out Pensions?

Can You Check Contracted‑Out Details with HMRC?

Yes—you can access a detailed breakdown of your National Insurance history and any contracted-out periods by logging into your HMRC Personal Tax Account.

Here’s what you’ll typically find:

• ✅ A full list of your NI contribution years

• ✅ Identification of any contracted-out years

• ✅ Your Contracted-Out Pension Equivalent (COPE) amount

• ✅ Your State Pension forecast, including any deductions

This is the first and most important step to understand how contracting out has affected your State Pension. It helps you plan whether to:

• Pay voluntary NI contributions

• Adjust your retirement budget

• Defer your pension for a higher income

💡 You can also request a paper version by contacting HMRC directly, especially if your online account is not set up.

Will Contracted‑Out Periods Affect State Pension Credit?

Yes, potentially. The State Pension Credit system is designed to top up the income of pensioners on low weekly amounts. But if your State Pension has been reduced due to contracting out, this can impact your eligibility or how much you receive.

Here’s how it works:

So while the contracted-out deduction reduces your State Pension, it may increase your eligibility for Pension Credit—because your weekly income is lower.

💡 If your total income is under £218.15/week (single) or £332.95/week (couple) in 2025, you may qualify for Pension Credit.

Are Pensions Affected by Divorce or Death of Spouse?

Yes, in some cases—but it depends on whether the State Pension is under the old or new system and the nature of your contracted-out arrangements.

In the Case of Divorce

• The State Pension cannot be shared directly, but any additional pensions (SERPS or S2P) earned before April 2016 may be included in pension sharing orders during divorce settlements.

• Workplace or private pensions that built up from contracting out can also be split or valued as part of a financial settlement.

💡 Contracted-out deductions remain with the individual—they’re not transferable.

In the Case of Death

The new State Pension (post-April 2016) cannot be inherited, but there are exceptions:

• • Widowed spouses may inherit extra State Pension built before 2016 under certain rules.

  • You may be eligible for a survivor’s pension through a contracted-out pension plan if your spouse was a member.

  • Bereavement Support Payments are available to spouses under the right conditions, regardless of contracting out.

💡 It’s essential to check both your own and your late partner’s NI records and private pensions to understand what benefits you may still be entitled to.

Conclusion

So, how much is state pension if you were contracted out? It depends on:

• Your number of qualifying years

• The amount of contracted‑out rebate you received

• Any voluntary top-ups or deferrals you make

Even fully contracted-out earners can secure a near-full pension—especially with top-up and deferral strategies. Make sure you:

• Check HMRC records

• Consider buying missing years

• Plan whether to defer

FAQs

1. How can I find out if I was contracted out?

   • Log in to your HMRC Personal Tax Account and review your NI history.

2. How do I top up contracted‑out years?

   • Pay Class 3 voluntary NI contributions to close gaps.

3. Can contracting out reduce your pension?

   • Rebates received then equate to deductions later—yes, it can.

4. Does contracting out affect my spouse’s state pension?

   • No—each person’s State Pension is calculated individually.

5. What if I defer after contracted‑out periods?

   • You still get the standard 4.68% uplift, boosting your weekly amount significantly.