Frequently Asked Questions (FAQ)
Contracting out
Can GMP benefits be held in a personal pension/stakeholder plan? | |||||||||||||||||||||||||||
Are contracting out rebates included in the maximum contribution that can be paid by a member? | |||||||||||||||||||||||||||
What forms are used in contracting out under a personal pension/stakeholder plan?
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Contracting out is the use of a pension scheme to provide benefits to replace SERPS/State Second Pension. | |||||||||||||||||||||||||||
An individual may have more than one pension plan, but may only have one plan for contracting out in any tax year. | |||||||||||||||||||||||||||
A self employed person is not normally eligible to contract out. However, if such an individual is occasionally employed and they elect to pay Class 1 National Insurance Contributions whilst in this employment, provided the total Class 1 'A' rate contributions exceed the Lower Earnings Level in a given tax year the DWP will allow contracting out. | |||||||||||||||||||||||||||
Yes, subject to the normal minimum pension age of 50 (55 from 6 April 2010). | |||||||||||||||||||||||||||
Can GMP benefits be held in a personal pension/stakeholder plan? | |||||||||||||||||||||||||||
No, any GMP benefits transferred into a personal pension/stakeholder plan must be converted to protected rights. | |||||||||||||||||||||||||||
The CA1542 (election to contract out form) can have a start date of either the beginning of the next tax year or can be backdated to 6 April of the current tax year. If the CA1542 is received by the National Insurance Services to Pensions Industry (NISPI) before 17 May, it can be backdated to 6 April of the previous tax year, provided it has been signed and dated by the member on or before 5 April of that earlier tax year. | |||||||||||||||||||||||||||
Are contracting out rebates included in the maximum contribution that can be paid by a member? | |||||||||||||||||||||||||||
No, the member can pay £3,600 pa or a 100% of relevant UK earnings if higher. | |||||||||||||||||||||||||||
The election to surrender should be made on form CA7313 for salary related arrangements and CA7314 for money purchase arrangements. This should be completed and sent to National Insurance Services to Pension Industry (formally COEG) once the formal period of notice has expired.
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What forms are used in contracting out under a personal pension/stakeholder plan?
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Forms (and their old equivalents for APP) are detailed in the table below;
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