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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 structural overview from April 2009: types of National Insurance contributions: contracted-out rate NICs

The Pensions Act 2007 (Commencement No. 4) Order 2011

The Pensions Act 2007 (Commencement No. 4) Order 2011 brought into force the abolition of the contracting out of the State Second Pension of defined contribution schemes (Money Purchase Schemes and Appropriate Personal Pension Schemes) from 6 April 2012. From 6 April 2012, anyone in a personal or stakeholder pension scheme or a contracted-out money purchase (‘defined contribution’) occupational pension scheme are no longer contracted out of the State Second Pension and will be liable to pay NICs at the Not contracted-out (full) rate.

Employees whose employers operate salary related occupational pension schemes and choose to join them, are normally contracted-out of the State Second Pension (State Earnings Related Pension Scheme (SERPS) Before 6 April 2002) and pay contracted-out (rebated) rate NICs. Employees over state pension age, see NIM36000, cannot be in contracted-out employment.

For the tax year 6th April 2011:

  • the main primary percentage for employees in contracted out employment is 10.4% and
  • the additional primary percentage is 2%.

For the tax year 6th April 2012:

  • the main primary percentage for employees in contracted out employment is 10.6% and
  • the additional primary percentage is 2%.

Remember the NIC rebate is also applied to those earnings between the LEL and PT/ST

For further information about the fiscal structure of contracted-out rate NICs, see NIM01018.

For further information about married women’s’ and widows’ reduced rate NICs, see NIM30000 and NIM31000, respectively.

For information on the structure of primary Class 1 NICs before 6 April 2003, see NIM01000 onwards.

For information on the structure of primary Class 1 NICs from 6 April 2003 and before 6 April 2009, see NIM01100 onwards