What is COPE Pensions? Contracted-Out Pension Explained

COPE pensions refer to pension benefits earned while contracted out of the State Pension. Learn how COPE works, where it is paid from, and how it affects your retirement income.

If you have checked your UK State Pension forecast, you may have come across the term COPE (Contracted-Out Pension Equivalent). Many people find this confusing, as it is not an actual pension but rather an estimate of pension benefits earned under different rules.

COPE applies to individuals who were part of a contracted-out workplace or private pension scheme before April 2016. If you were contracted out, you and your employer paid lower National Insurance contributions, meaning a portion of your retirement income will come from a private or workplace pension rather than the State Pension.

Understanding how COPE works and how it affects your pension benefits can help you plan for retirement effectively.

What Does COPE Mean?

COPE stands for Contracted-Out Pension Equivalent. It is not an amount deducted from your State Pension, nor is it an additional pension paid by the government. Instead, it is an estimate of how much you would have received in Additional State Pension if you had not been contracted out.

Before 2016, some workplace pension schemes allowed employees to contract out of the Additional State Pension (also known as SERPS or the State Second Pension). In return, both employees and employers paid reduced National Insurance contributions, with the expectation that the workplace pension would provide equivalent or better benefits.

How Does COPE Affect the State Pension?

Many people assume that COPE reduces their State Pension payments, but this is not strictly true. The new full State Pension is currently £203.85 per week (2023/24 tax year). However, if you were contracted out, your State Pension forecast may show a lower amount than this.

The reason for this is that, during the years you were contracted out, you were not building up Additional State Pension. Instead, your pension benefits for those years are held in a private or workplace pension scheme, which will pay you separately in retirement.

Does COPE Mean You Will Receive Less Pension Money?

Not necessarily. COPE does not mean you lose money, but rather that part of your pension comes from a different source. While your State Pension may be lower, your workplace or private pension should make up the difference. However, the actual amount you receive depends on how your workplace pension has performed over time.

Where is My COPE Pension Paid From?

Your COPE amount is not paid by the government. Instead, it is included in your workplace or private pension. To check your COPE benefits:

  • Look at your old pension statements from jobs where you were in a workplace pension scheme.

  • Contact your previous employers to find out which pension provider was used.

  • Check your pension provider’s records to see when you can start receiving payments.

If you have multiple pensions, you may have more than one COPE-related payment.

Can You Access Your COPE Pension Early?

If your COPE amount is held in a Defined Contribution pension (such as a personal or workplace pension), you may be able to withdraw it from the age of 55 (rising to 57 in 2028). If it is in a Defined Benefit scheme (such as a final salary pension), it may have a set retirement age, such as 60 or 65.

Unlike the State Pension, which is paid automatically at State Pension age, you need to actively claim your workplace or private pension.

How to Check Your COPE Pension Entitlement

To find out more about your COPE pension:

  1. Check Your State Pension Forecast – Visit the UK Government website to see if you have a COPE amount listed.

  2. Review Your Pension Scheme Documents – Look at pension statements from past employers.

  3. Contact Your Pension Provider – If you are unsure where your COPE pension is held, contact the Pension Tracing Service to find lost pensions.

Final Thoughts

COPE pensions refer to the pension benefits earned while contracted out of the Additional State Pension before 2016. While this may mean you receive less from the State Pension, the difference should be made up through a separate workplace or private pension.

If you are unsure where your COPE-related pension is held or when you can access it, checking with previous employers or pension providers is essential. Understanding your COPE entitlement can help you plan your retirement income more effectively.