State Pensions and Contracting Out

State Pensions and Contracting Out


Background

Government has established statutory provisions relating to retirement pensions as an aspect of social welfare. These statutory provisions govern the obligations of both employee and employer-the employer's duties include aspects of pensions administration including collection of contributions.

Basic Pension

Provided the contribution record of the employee is adequate, he or she is entitled to a basic pension when he or she attains retirement age.

Contracting Out

The Pensions Act 2014 introduced a new state pension for people reaching state pension age on or after 6 April 2016, replacing the previous basic state pension and additional state pension and ending contracting out for defined-benefit schemes. All of our employment contracts have been updated accordingly with the removal of the clause referring to the contracting out certificate.

Additional Voluntary Contributions

If you set up an occupational pension scheme, you must allow members to pay additional voluntary contributions (AVCs), either on a regular or occasional basis. Employees may pay these AVCs, either into your scheme or they may enter into a free standing AVC with an authorised provider (e.g. banks, insurance companies, building societies, or unit trusts).

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