Contracted-out years and your State Pension (2026/27)

What contracting out actually meant

From 1978, UK employees could be "contracted out" of the State Earnings-Related Pension Scheme (SERPS, later State Second Pension / S2P). Two mechanisms:

• Defined benefit (DB) schemes: the employer guaranteed to pay a benefit equivalent to (or better than) what SERPS would have paid. In return, both employee and employer paid lower NI on that band of earnings. Contracted-out DB membership ended in April 2016.
• Defined contribution (DC) schemes: from 1988, individuals could contract out into personal pensions, with HMRC paying a "rebate" of NI into the personal pension. DC contracting-out ended in April 2012.

If you were in either type of scheme during the qualifying years, you have contracted-out years on your NI record.

How the COPE deduction works

The Contracted-Out Pension Equivalent (COPE) is the State Pension HMRC estimates you'd have received from SERPS/S2P if you hadn't been contracted out. Your workplace scheme is required to pay you at least an equivalent amount.

In the starting-amount calculation:

• Old system: COPE is deducted from your basic + SERPS calculation.
• New system: COPE is also deducted from your full-rate calculation.
• The deduction is applied to both pathways before comparing.

HMRC also subtracts COPE from your "starting amount" if it includes contracted-out periods, ensuring you don't get the same pension twice (once from the State and once from your workplace).

Where to find your COPE figure

1. Sign in to your State Pension forecast.
2. Look for the "Contracted Out Pension Equivalent" section. It shows the weekly amount your workplace scheme should provide as a replacement.
3. Check your workplace pension statement — the contracted-out portion is usually labelled "Guaranteed Minimum Pension" (GMP) for pre-1997 service, or "post-97 contracted-out reference scheme" for post-1997.

Comparing your COPE to your actual workplace pension reveals whether you're benefiting from contracting out (workplace pension > COPE) or losing out (workplace pension < COPE).

Typical COPE deduction sizes

A 30-year contracted-out high earner could see ~£100/week less in State Pension than someone with identical NI years who was never contracted out. The workplace scheme is supposed to make up the difference.

Can post-2016 NI years recover the gap?

This is the most important practical question for 2026/27 retirees with contracted-out years. The answer is yes, partially, up to a cap:

• If your starting amount was below the full new State Pension (£241.30/week in 2026/27), each post-2016 qualifying year adds ~£6.58/week.
• You can keep adding years until you reach the full rate.
• Each year requires Class 1 NI from earnings, or voluntary Class 2/3 contributions.

Worked example: man retired 2022 (SPA 66, so 6 post-2016 years available), heavily contracted-out, starting amount £170/week at 2016. Adds 6 × £4.45 = £26.70/week (2016 figures). Total at 2022 retirement: £196.70/week. Uprated to 2026/27 by triple-lock: around £225/week — close to but not at the full rate.

Buying voluntary NI for missing years could push him over the line if any were available.

Should I buy voluntary NI years if I'm contracted-out?

For contracted-out borrowers approaching State Pension Age, this is one of the highest-return decisions available:

• Cost of one Class 3 year: £956.80 in 2026/27 figures (£18.40/week × 52).
• Pension uplift: £6.58/week = £342/year of pension forever.
• Payback period: 2.7 years of pension.

If you live more than 3 years past State Pension Age, the voluntary contribution profits. Most healthy retirees live well beyond that. For contracted-out borrowers under the full new rate, buying voluntary NI is almost always a strong financial decision.

See our Class 3 top-up calculator for the math on your situation.

The post-2016 protected payment escape

If your contracted-out period created a starting amount above the full new State Pension (rare but possible for very high earners with extensive SERPS pre-1997), the excess becomes a "protected payment" that survives uprating — just with CPI rather than triple-lock.

In this case, additional post-2016 NI years don't add to your pension. You're already over the cap.

Common contracted-out misunderstandings

• "My State Pension forecast is wrong because it doesn't show full £241.30." If you have contracted-out years, the lower amount is correct. The workplace scheme makes up the difference.
• "My DB scheme didn't pay me enough to cover COPE." If your DB scheme guaranteed minimum pension (GMP) terms, you should be paid at least COPE — if you're not, raise it with the scheme administrator and potentially the Pensions Ombudsman.
• "COPE means I get less than my colleagues who weren't contracted out." From the State, yes. But you should also have a higher workplace pension to compensate.
• "I should refuse the COPE deduction." You can't — it's a statutory calculation. But you can fill the gap with voluntary NI or post-2016 contributions.
• "I was contracted out and now my pension is gone." No, the State Pension uplift mechanism (post-2016 years adding to your starting amount) is generous — many contracted-out borrowers reach close to or at the full new rate by retirement.

Sources

• gov.uk — Check your State Pension forecast (includes COPE)
• gov.uk — COPE amount guidance
• gov.uk — Voluntary NI contributions
• The Pensions Regulator

Related content

• State Pension forecast calculator
• Class 3 NI top-up payback calculator
• State Pension deferral — should you delay?
• Derived State Pension from a spouse
• Pre-2016 starting amount
• Contracted-out years and your forecast