The following Pensions guidance note provides comprehensive and up to date legal information covering:
THIS PRACTICE NOTE APPLIES IN RELATION TO SCHEMES THAT WERE CONTRACTED-OUT SALARY-RELATED (COSR) SCHEMES BEFORE 6 APRIL 2016
Contracting-out on a salary-related basis (also known as defined benefit (DB) contracting-out) was abolished on 6 April 2016. Schemes that were contracted-out salary-related (COSR) schemes immediately before that date therefore ceased to be so on that date. However any contracted-out benefits accrued on a salary-related basis during periods of contracted-out employment continue to exist.
This Practice Note covers the statutory requirements that were applicable to COSR schemes before 6 April 2016.
For information on the DB contracting-out requirements applicable to former COSR schemes on and from 6 April 2016, see Practice Note: Legal regime applicable to Section 9(2B) rights and GMPs from 6 April 2016.
Pre-abolition, the various contracting-out requirements in respect of COSR schemes were set out, among other things, in:PSA 1993, ss 9(2A)(b), 9(2B)
Pt III of the Pension Schemes Act 1993 (PSA 1993), andPSA 1993, Pt III
the Occupational Pension Schemes (Contracting out) Regulations, SI 1996/1172 (the Contracting-out Regs)SI 1996/1172
HMRC also issued a manual (CA14C) which provided guidance for salary-related schemes in relation to contracting out.CA14C
As contracting-out legislation does not override scheme rules, the rules of COSR schemes had be framed so as to comply with the relevant statutory requirements. Contracted-out schemes usually included:PSA 1993, ss 9(2A)(b), 9(2B)
an appendix to their trust deed and rules containing the provisions that applied in relation to members' contracted-out benefits (known as a 'contracting-out appendix'), and
a clause in the trust deed and rules which stated that the appendix applied to members with
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