4. Contracting out

When you can contract out

You can only contract out of the Additional State Pension if your employer runs a contracted out pension scheme. Check with them.

To contract out you must be earning over the lower earnings limit of £5,824 in the 2015 to 2016 tax year.

While you’re a member of a contracted out workplace pension you don’t contribute to the Additional State Pension.

National Insurance while contracting out

You pay lower National Insurance contributions while you contract out, and you may get a rebate if:

What happens when you retire

You’ll get a pension from your employer’s workplace pension scheme.

If you were a member of a contracted out, salary-related workplace pension scheme before 6 April 1997, you’re entitled to a ‘Guaranteed Minimum Pension’. Check with your employer or the pension tracing service.

Help to decide if you should contract out

Contact your pension scheme provider or speak to an independent financial adviser for more information, or call HM Revenue and Customs’ (HMRC) Contracted Out Pensions Helpline.