Contracting out (Pensions) definition

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What does ‘contracting-out’ mean for pension lawyers?

Interaction with the additional State pensionBefore 6 April 2016, there were two levels of State pension provision:•the basic State pension—this was a flat rate broadly based on the amount of National Insurance Contributions (NICs) a person paid or was treated as having paid, and•the additional State pension known as the State Second Pension (S2P)—as its name indicated, it was a pension paid on top of the basic State pension. It was related to an individual's earnings. Note that prior to April 2002, the additional State pension was known as the State Earnings Related Pension Scheme (SERPS)Before 6 April 2016, pension schemes could either 'contract in' or 'contract out' of the additional State pension. If a pension scheme was 'contracted-in' to the additional State pension, members would receive the additional State Pension on top of their basic State pension (depending on their earnings).If a pension scheme was 'contracted-out' of the additional State pension, scheme members would not receive the additional State pension. In exchange:•the scheme had to provide the member with contracted-out benefits that were broadly at least as good as the additional State pension they had given up, and•the relevant member (and their employer) received rebates on their NICs (known as contracted-out rebates)Contracting-out was therefore a mechanism through which an individual (whether employed or

Abolition of DB contracting-out—an introduction

This Practice Note focuses on the abolition of DB contracting-out from 6 April 2016.The only other form of contracting-out that ever existed, contracting-out on a money purchase basis (also known as DC contracting-out), was abolished earlier on 6 April 2012. For more information on this, see Practice Note: Abolition of DC contracting-out.For information generally on the meaning and purpose of contracting-out, see Practice Note: What does ‘contracting-out’ mean for pension lawyers?Why was DB contracting-out abolished?On 6 April 2016, contracting-out on a salary-related basis (also known as DB contracting-out) ceased to exist. Schemes that were contracted-out salary-related (COSR) schemes immediately before 6 April 2016 automatically ceased to be contracted-out with effect from that date.This was originally announced in a White Paper published in January 2013, in which the government outlined plans to combine the basic state pension and the additional state pension (known as the State Second Pension or S2P) into a single-tier flat-rate state pension.As the underlying purpose of contracting-out was to reduce the financial burden on the state pension system by transferring the responsibility for the additional state pension from the state to contracted-out private sector pension schemes, the disappearance of the additional state pension necessarily resulted in the abolition of contracting-out.The intention was initially for the reforms to be introduced on April 2017, however a written ministerial statement

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(A) About this title—authors, overview

ContributorsAdvisory EditorWYN DERBYSHIRE, PhD., SolicitorPartner, Gunnercooke LLPConsultant, King & Wood MallesonsContributorTIM SEWELL, M.A. (Oxon), SolicitorTitle overviewVolume 31(1) PENSION SCHEMES (2016 Reissue) has been revised and updated to take account of developments in pensions law, in particular the provisions of the Pensions Act 2014, which creates a new state pension for people reaching pensionable age on or after 6 April 2016, and the Pension Schemes Act 2015 which, in tandem with the Taxation of Pensions Act 2014, is largely concerned with implementing the government’s programme

78 Introduction to express terms of a contract of employment

78 Introduction to express terms of a contract of employmentThe content of a contract of employment may vary greatly. Primarily it is for the parties to decide what its terms should be. The contract may be limited to a simple agreement that the employee will work for the employer for a set remuneration or, for example in the case of a contract between a company and an executive director, it may be in the form of a service agreement and contain detailed express terms as to the director’s obligations before and after employment and

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421. Meaning of 'contracted-out employment' and 'guaranteed minimum pension'.

421.     Meaning of 'contracted-out employment' and 'guaranteed minimum pension'. In relation to any period before the second abolition date1, the employment of an earner2 in employed earner's employment3 was 'contracted-out employment' in relation to him during that period if: (1)     the earner was under pensionable age4; (2)     the earner's service in the employment was service which qualified the earner for a pension provided by a salary related contracted-out scheme5; and (3)     there was in force a contracting-out certificate issued by the Commissioners for Revenue and Customs6 stating that the employment was contracted-out employment by reference to the