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HMRC internal manual

National Insurance Manual

Class 1 structural overview from April 2009: Occupational and Personal Pension Schemes

For Further information on Occupational Pension Schemes See NIM01021

Changes from 6 April 2012

The Pension Reform Programme delivered HMRC changes from the Pensions Acts 2007 and 2008, as well as the Pensions Act (Northern Ireland) 2008. These changes included measures to simplify the administration of occupational and personal pension schemes by abolishing contracting out on a defined contribution basis.

What are these changes:

Contracting out of the additional State Pension on a Defined Contribution basis was abolished from 6 April 2012. This means that from 6 April 2012 individuals have automatically been brought back into the State additional pension scheme and are no longer able to opt into

  • Contracted out Money Purchase (COMP) schemes
  • Sections of contracted out mixed benefit (COMB) schemes contracted out on a DC basis.
  • Appropriate Personal Pension (APP) schemes and APP Stakeholder schemes.

A person can still be a member of a money purchase schemes and new employees can still join employers existing schemes they just no longer have a contracted out status.

This means that, from the 2012/13 tax year the National Insurance contributions (NICs) category letters F, G, H, K, V and S will become obsolete and should not be entered onto forms P11 or P14, and Scheme Contracted Out Numbers (SCONs) will no longer be entered onto the form P14.

Please note that, for tax years after 2012/13, it will still be possible to contract out of the additional State Pension on a Defined Benefit basis (Contracted-out Salary Related (COSR) schemes). However, the appropriate scheme must hold a valid contracting-out certificate to do so