New State Pension Transitional Arrangements: Why Your Forecast Isn't a Round Number

Quick answer

If your State Pension forecast shows a figure like £198.47 or £226.12 a week rather than the clean, publicised full rate, nothing is wrong with your record. Everyone who had any National Insurance history before 6 April 2016 — when the new, simpler State Pension replaced the old two-tier Basic State Pension plus Additional State Pension system — had a 'starting amount' calculated individually from their own NI record at that date. That calculation blends decades of contribution history, including any period spent contracted out of the Additional State Pension, which is deducted from the calculation as a COPE (Contracted-Out Pension Equivalent) figure.

Because almost nobody's NI history lines up perfectly with either the old or new formula, almost nobody landed on a round number in 2016. Most people can still move their forecast up toward the full rate by adding qualifying years after 2016, but the starting point itself was — and remains — personal to your work history.

The 2016 transition, in outline

Before 6 April 2016, the State Pension had two layers:

1. Basic State Pension — a flat weekly amount built up through qualifying years of National Insurance contributions or credits, up to a maximum of 30 qualifying years (for people reaching State Pension age after April 2010).
2. Additional State Pension — SERPS (State Earnings-Related Pension Scheme, 1978–2002) and later State Second Pension (S2P, 2002–2016) — an earnings-related top-up that could add substantially more, depending on earnings and NI record.

From 6 April 2016, these two layers were replaced by a single flat-rate new State Pension, requiring 35 qualifying years for the full amount (10 years minimum to receive anything at all). To move everyone from the old system to the new one fairly, the Department for Work and Pensions (DWP) performed a one-off calculation for every individual, comparing:

• What they would have received under the old rules (Basic State Pension + Additional State Pension) as at 6 April 2016, and
• What they would have received under the new rules, applying the new-system formula retrospectively to their pre-2016 NI record.

Whichever figure was higher became that person's 'starting amount'. This is the foundation figure your forecast is built on.

What was contracting out, and why does it matter?

Between 1978 and 6 April 2016, employees could be members of a workplace pension scheme that was 'contracted out' of the Additional State Pension (SERPS/S2P). In exchange for giving up part or all of their Additional State Pension entitlement, the employee and employer paid a reduced rate of National Insurance, and the money saved was meant to be redirected into the private contracted-out pension scheme instead.

Millions of people were contracted out at some point — through defined benefit occupational schemes, and later through some defined contribution and personal pension arrangements as well. If you worked for a large employer with a company pension scheme any time from the late 1970s through to 2012 (when contracting out via defined contribution schemes was abolished; DB contracting out ended in April 2016), there is a reasonable chance some of your working years were contracted out.

COPE: the deduction that makes forecasts look odd

When DWP calculated everyone's new-rules starting amount in 2016, it needed to avoid double-counting: paying someone the full new-system State Pension and letting them keep a contracted-out pension pot that was specifically built using NI rebates in lieu of Additional State Pension.

The solution was the Contracted-Out Pension Equivalent (COPE): an estimate of the Additional State Pension you gave up during your contracted-out years, deducted from the new-rules calculation. Two important points:

• The COPE amount is not lost. It should already be reflected in the value of your contracted-out pension pot (occupational, personal, or workplace scheme) — that pension exists precisely because the NI rebate was diverted there instead of into the state system.
• COPE only affects the new-rules side of the 2016 comparison. Since your final starting amount was the higher of the old-rules and new-rules figures, if your old-rules figure (Basic + actual Additional State Pension entitlement, already net of your real contracted-out history) was higher, that became your starting amount instead, and the COPE deduction on the new-rules side becomes somewhat academic — it simply didn't end up being the figure used.

This dual calculation is exactly why forecasts are so individual: your final number depends on your entire NI history run through two different formulas, with a deduction applied to one of them, and the better of the two results kept.

Worked example — Susan, contracted out for 18 years

Susan worked from 1985 to 2026, with 18 years contracted out through a defined benefit company scheme (1988–2006) and the rest not contracted out.

• Old-rules calculation: her Basic State Pension entitlement (near-maximum qualifying years) plus a modest Additional State Pension for her non-contracted-out years comes to roughly £176 a week (illustrative).
• New-rules calculation: applying the new formula to her full NI record gives a higher theoretical figure, but her COPE deduction (representing the 18 contracted-out years) reduces it to roughly £189 a week (illustrative).
• Because the new-rules figure (£189) is higher than the old-rules figure (£176), £189 becomes her starting amount — an odd number, reflecting both her real NI history and the COPE deduction.

Susan's actual pension income will also include whatever her old defined benefit scheme pays her separately for the contracted-out years — that occupational pension is where the "missing" Additional State Pension effectively went.

These figures are illustrative only — to see your own starting amount and COPE figure, use the online forecast service and, if needed, request a State Pension statement from the Pension Service for the underlying breakdown.

Two outcomes after the 2016 starting amount was set

If your starting amount was below the full new State Pension rate

This is the more common position, especially for people with contracted-out years or gaps in their record. Each qualifying year of National Insurance contributions or credits earned from 6 April 2016 onwards adds approximately 1/35th of the full new State Pension rate to your forecast — continuing until either:

• Your forecast reaches the full rate, or
• You reach State Pension age,

whichever happens first. This is the main mechanism by which most people's forecasts climb over their working life, and it is also why filling gap years with voluntary Class 3 contributions can be worthwhile for people who are short of the full rate.

If your starting amount was above the full new State Pension rate

Less common, but it applies to people who built up a large Additional State Pension before 2016 — often higher earners who were not contracted out, or who had many years of high earnings under SERPS in the 1980s and 1990s. For these people, the excess above the full flat rate is preserved as a protected payment.

The protected payment:

• Is paid on top of the full flat-rate new State Pension for life.
• Increases each year in line with CPI inflation only — it does not benefit from the wider triple lock (the higher of CPI, average earnings growth, or 2.5%) that applies to the main flat-rate component.
• Cannot be increased further by additional qualifying years after 2016 — those years top up the flat-rate portion (if not already at maximum) but do not add to the protected payment itself.

Over a long retirement, the practical effect is that the protected-payment slice of a pension can grow more slowly in real terms than the flat-rate slice next to it, simply because they are uprated by different rules.

Should you pay voluntary National Insurance to fill gaps?

Whether filling a gap year is worthwhile depends entirely on where your own forecast sits, which is why a blanket answer is risky:

1. Check your online forecast first. It shows your current forecast amount, whether you are 'on track' for the full new State Pension, and which specific past years are shown as gaps that can be filled voluntarily.
2. If you are already forecast to reach the full rate through existing years plus remaining working years before State Pension age, paying voluntarily for older gap years typically adds nothing — you cannot exceed the full flat rate through qualifying years alone (protected payments aside).
3. If your forecast shows a shortfall, voluntary Class 3 contributions for specific gap years can be strong value, because each qualifying year adds a lifetime weekly amount that, over a typical retirement, usually recoups the one-off voluntary contribution cost within a small number of years — though this depends on the current voluntary contribution rate and your own life expectancy assumptions.
4. Not all gap years cost the same or add the same amount — check the specific years HMRC/DWP identifies as fillable and the price quoted for each before paying, and be aware that time-limited windows for filling older gaps (further back than the usual six tax years) have applied at various points and may not remain open indefinitely.

How to find your own starting-amount detail

• Check your forecast online via the gov.uk 'Check your State Pension forecast' service (Government Gateway login required). This shows your current forecast, your State Pension age, and whether you are on track for the full rate.
• Request a State Pension statement from the Pension Service for a more detailed breakdown if the online summary doesn't show the figures you need.
• Trace old contracted-out pensions via the free Pension Tracing Service if you have lost contact with an old workplace scheme — this is often the "other half" of your contracted-out years that the COPE deduction refers to.
• Confirm current rates on gov.uk before making financial decisions — State Pension rates are uprated every April and the exact current full weekly rate should always be checked directly against the official published figure rather than assumed from an older source.

Sources

• gov.uk: The new State Pension
• gov.uk: Check your State Pension forecast
• gov.uk: Contracted out of the Additional State Pension
• gov.uk: Voluntary National Insurance contributions
• Pension Tracing Service: gov.uk