Find out how the ending of contracting-out affects pension entitlements, notifications and Guaranteed Minimum Pension (GMP) calculations.
This guidance is for trustees and administrators of defined benefit pension schemes who are responsible for contracted-out pension rights that were built up before 6 April 2016.
The new State Pension has replaced the existing basic and Additional State Pension and ended contracting-out for defined benefit pension schemes.
HMRC will not track contracted-out rights or issue statements to pension schemes.
If a member leaves a pension scheme or moves their pension rights on or after 6 April 2016 for example via a transfer, then schemes should not notify HMRC.
Where a member left or transferred their rights before 6 April 2016, pension schemes should advise HMRC before December 2018 as part of their Scheme Reconciliation activity.
Schemes which ceased before the abolition of contracting-out
The majority of schemes that ceased to contract-out before 6 April 2016 will not need to notify HMRC of any method of preservations (MOPs) that are arranged on or after 6 April 2016. However, the Pension Protection Fund (PPF) will continue to notify HMRC of details of members with a PPF compensation payment and HMRC will record PPF MOPs until December 2018.
Where MOPs arrangements are made before 6 April 2016 pension schemes need to notify HMRC before December 2018.
What you need to do
If you provided a defined benefit contracted-out scheme you’ll need to:
- comply with the legislation
- make sure that members’ entitlements resulting from contracted-out employment are protected
- provide a Guaranteed Minimum Pension (GMP) to your members for contracted-out service between 6 April 1978 and 5 April 1997
- find out what types of schemes GMP rights can be transferred
You can use the GMP checker to get a calculation for your members.