3.8 Contracting Out
-
'Contracting out' refers previously to a decision to leave the
State Earnings Related Pension Scheme, SERPS and now to leaving
S2P (not the basic pension).
-
Contracting out involves establishing an occupational or personal
pension scheme to replace the S2P benefits normally accruing during
the period in that scheme.
-
Contracting out also entitles contributors to rebates in NI contributions,
which result in:
- Lower NI contributions where the contracting out is done through
an occupational scheme (providing a GMP prior to 6th April 1997
and 'requisite benefits' related to the reference scheme from that
date).
- Redirected NI contributions where the contracting out is done
through an Appropriate Personal Pension (APP), FSAVC or COMP.
|
-
Where contracting out is achieved through a defined benefit occupational
scheme, the scheme must provide GMP (Guaranteed Minimum Pension)
prior to 6th April 1997 and requisite benefits from that date. These
minima essentially guarantee that the member will not be worse off
than had he remained a member of SERPS.
-
Under defined contribution (i.e. money purchase) schemes, whether
occupational or personal, the redirected NI contributions provide
Protected Rights, which are subject to a number of special provisions,
but are not guaranteed to match SERPS.
-
Contracting out was handled by the Occupational Pensions Board
(OPB) prior to it being dissolved on 5th April 1997. Their jurisdiction
as regards contracting out has now passed to the NI Services to
Pensions Industry department of the Inland Revenue Contributions
agency, who will need to be satisfied that the scheme meets the
necessary requirements, both financial and administratively.
- Please also refer to Contracting Out Rebates
|