Abolition of DC contracting-out
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Practice notesAbolition of DC contracting-out
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Practice notes
contracting-out on a money purchase basis before 6 April 2012
Contracting-out was the mechanism whereby an individual (whether employed or self-employed) could elect to forgo accrual of the element of the state pension which, before 6 April 2016, was known as the additional state pension (or Second State Pensions (S2P)).
Contracting-out on a money purchase basis (or DC contracting-out) first became possible in April 1988.
Contracting-out on a money purchase basis required the relevant contracted-out pension scheme to provide contracted-out members with ’protected rights’ in lieu of the state benefits forgone as a consequence of contracting-out.
Schemes contracted-out on a money purchase basis
Before 6 April 2012, protected rights could be provided through the following contracted-out schemes:
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contracted-out money purchase (COMP) schemes. While these occupational pension schemes were mostly defined contribution schemes, there could also be defined benefit schemes contracted out on a money purchase basis through a protected rights underpin
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the COMP section of mixed benefit (COMB) schemes. COMB schemes were created on 6 April 1997 and made it possible for a contracted-out salary-related
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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Contracting-out definition
What does Contracting-out mean?
An arrangement under which a member of a pension scheme that meets certain requirements pays reduced insurance-contributions-'>national insurance contributions and/or rebates are paid to the pension scheme in return for which the scheme provides benefits as an alternative to state earnings related pension scheme (SERPS)/S2P/additional state pension. Contracting-out was abolished with effect from 6 April 2016.
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