Contracting-out

Meaning of ‘contracting-out’

Until 5 April 2016, some schemes could 'contract out' of the additional state pension, while others were 'contracted-in'.

Between 6 April 2002 and 5 April 2016, the additional state pension was the pension arising under the State Second Pension (S2P); prior to 6 April 2002, it was the pension arising under the State Earnings Related Pension Scheme (SERPS).

On 6 April 2016, the additional state pension disappeared. The government combined the basic state pension and the additional state pension into a single-tier state pension, whereby individuals earn a flat rate of state pension based not on their earnings but on the number of years during which they paid national insurance contributions (NICs). This state pension reform resulted in the abolition of contracting-out. For more information, see 'Abolition of DB contracting-out from 6 April 2016' below

If an individual was 'contracted-in' to the additional state pension through their scheme, they received an additional earnings-related pension from the state on top of their basic state pension. If an individual was 'contracted out' of the additional state pension, they did not receive the additional

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Powered by Lexis+®
Latest Pensions News

PDP survey finds most pension providers ready for connection to dashboard ecosystem

The Pensions Dashboards Programme (PDP) has published a statement reaffirming the government's commitment to delivering pensions dashboards and sharing survey insights from a sample of FCA-regulated pension providers.  The 'Pensions Dashboards Readiness Survey',  undertaken by Ipsos between October and November 2024 on 130 FCA-regulated pension providers, indicates that more than 90% of providers intended to connect to the dashboards ecosystem before or by their ‘connect by’ dates as set out in the Department for Work and Pensions (DWP) guidance of March 2024. Also, more than 8 in 10 of respondents said all their data used for matching people to their pensions on dashboards was held digitally, while 85% of respondents reported that they were very or completely confident in their ability to meet the connection requirements while also maintaining their digital readiness. The survey is meant to be viewed as a ‘snapshot’ of dashboard readiness at the end of 2024, approximately 6 months ahead of the first connection date set out in the DWP guidance. Although some providers may face initial challenges in meeting the voluntary deadlines, the PDP notes that regulators have emphasised a flexible approach that avoids punitive measures, instead aiming to ensure that all providers eventually connect by 31 October 2026, thereby supporting improved retirement planning for individuals.

Police injury benefits: consultation outcome on 12-Month rule compatibility with statutory obligations published

The Home Office has published the consultation outcome on the subject of the 12-month rule in regulation 12 of the Police (Injury Benefit) Regulations 2006, SI 2006/932. Regulation 11 provides for the payment of injury awards for police officers who, as a result of injury received in the course of duty, have been permanently disabled and are unable to continue in the role. An injury award consists of a pension and a gratuity. Regulation 12 provides a significant additional gratuity for police officers who become totally and permanently disabled within 12 months of an injury. The additional gratuity is five times the annual value of the officer’s pensionable pay. The consultation, which ran between 12 May 2021 and 7 July 2021, examined the 12-month rule's compatibility with the Equality Act 2010, focusing on its impact on mental health injuries compared to physical injuries. Most respondents felt the 12-month rule was inconsistent with the Equality Act and did not adequately address progressive mental health conditions. However, there was no consensus among representative organisations, and the data collected was inconclusive. The Home Office therefore intends to gather more focused data and evidence through an engagement exercise with stakeholders and medical experts before considering any changes to regulation 12. However, if sufficient evidence and data support an amendment to regulation 12, the Home Office will consult further on any proposed changes.

View Pensions by content type :

Popular documents