Reader’s Question: State pension forecast explained

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Reader's Question:

I recently received a letter from the pension service. In it it gives the following figures of how my state pension pension is made up:

• Basic state pension £102.15
• Pre97 additional State pension £119.92
• Less contracted out deduction (cod) of £74.68
• Total payable £45.24
• Post 97 additional State Pension £0.68
• Graduated Retirement Benefit £5.83.

Total: £153.90.

My query is the two figures £119.92 and £74.68 where do they come from?

My response:

The letter you are referring to is a state pension forecast which breaks down your state pension entitlement.

The first thing to explain is the additional State Pension.

You can build up entitlement to an additional State Pension if you are below State Pension age and you are:

• employed and earning over £5,044 (from any one job)
• looking after children under 12 years old and claiming child benefit
• caring for a sick or disabled person for more than 20 hours a week and claiming Carer's Credit
• a registered foster carer and claiming Carer's Credit
• receiving certain other benefits due to illness or disability

If you are employed and have a pension then you can ‘contract out’ of the additional State Pension and instead build up an equivalent benefit within the aforementioned pension. If this were the case then you would not accrue an additional State Pension entitlement relating to the period for which you contract out.

And this brings me back to your figures.

The £119.92 relates to the part of your additional State Pension accrued before 1997. Now it seems that you were likely contracted out through a pension scheme (an employer or personal one) which obviously reduced your entitlement to an additional State Pension for the period for which you were contracted out – hence the deduction of £74.68.

Below are a couple of links which you should find useful should you have any other questions:

The official guide to understanding your State Pension forecast

Directgov website's – Understanding your State Pension forecast