Government consults on changes from abolition of DB contracting out

The government has launched a consultation on proposed changes resulting from the abolition of defined benefit contracting-out of the additional state pension for people in workplace pension schemes.

The government confirmed the change in the 2013 Budget.

Houses of Parliament

Defined benefit contracting-out will end when the current two-tiered system of basis and additional state pension is replaced by a single-tier pension in April 2016, subject to the Royal Assent of the Pensions Bill 2013-14.

From this date, defined benefit pension members and their employers will no longer be entitled to pay a lower rate of national insurance contributions.

The consultation is seeking views from pension scheme trustees, advisers, employers, pension scheme members and member representative organisations.

It is seeking views on:

  • The draft Occupational pension schemes (power to amend schemes to reflect abolition of contracting-out) regulations 2014 (annex A), which sets out how employers can amend scheme rules, without trustee approval, to reduce costs following the increase in employer national insurance when contracting-out ends.
  • The draft Occupational pension schemes (schemes that were contracted-out) regulations 2014 (annex B), which will replace the Occupational pension schemes (contracting-out) regulations 1996.

The majority of amendments are due to take effect from April 2016.