ChatterBank0 min ago
Pensions.To contracted in/contracted out?
12 Answers
Which is better,contracted in or contracted out.
My son has a pension plan which he pays through his employment.
In which his employer pays into it more than my son does each month.
The company ,Aegon,with whom the plan is with,says it is contracted out but on his wage slip it states how much he pays into his pension
Then...
NI Contracted In £****
Can someone please explain,is he contracted in or out??????
Most confusing!!!!
My son has a pension plan which he pays through his employment.
In which his employer pays into it more than my son does each month.
The company ,Aegon,with whom the plan is with,says it is contracted out but on his wage slip it states how much he pays into his pension
Then...
NI Contracted In £****
Can someone please explain,is he contracted in or out??????
Most confusing!!!!
Answers
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I'm the same as your son I think kloofnek.
My employer pays more money into my company pension than I do and that is contracted out apparently. However, my state pension from my NI contributions is contracted in. So I shall get both a company pension and a state pension i.e pension contributions go to the company and NI contributions go to the government and your son is probably the same - 2 pensions.
(I can't explain what we are contracted in or out of though!)
My employer pays more money into my company pension than I do and that is contracted out apparently. However, my state pension from my NI contributions is contracted in. So I shall get both a company pension and a state pension i.e pension contributions go to the company and NI contributions go to the government and your son is probably the same - 2 pensions.
(I can't explain what we are contracted in or out of though!)
'Contracted in' means contracted into the STATE additional pension (the top-up to the Basic State Pension - everyone who pays the necessary NI gets the Basic State Pension).
'Contracted out' means that you have an additional pension, either a Company pension or a private pension, that adds to your Basic State Pension.
But the rules are changing - Factor30 is good on this stuff and perhaps knows more.
'Contracted out' means that you have an additional pension, either a Company pension or a private pension, that adds to your Basic State Pension.
But the rules are changing - Factor30 is good on this stuff and perhaps knows more.
Err, wrong, I'm afraid.
As far as I know, contracting-out will shortly be impossible through a money-purchase occupational pension scheme, or a personal pension or stakeholder pension. Those people contracted out through such as scheme will be able to continue to make their own contributions and to benefit from any employer contributions to the scheme. Accrued benefits will continue of course.
However, they will no longer be able to benefit from any rebate of NICs. This is important as it will kill the majority of such schemes dead.
The pensions Green Paper presented to the House of Commons in April 2011 included proposals for the introduction of a much higher universal basic pension, part-financed by scrapping the additional pension (S2P) and with it the ability to contract out. But the Pensions Minister told the HoC that Serps and S2P benefits pension savers had accrued would be preserved.
As far as I know, contracting-out will shortly be impossible through a money-purchase occupational pension scheme, or a personal pension or stakeholder pension. Those people contracted out through such as scheme will be able to continue to make their own contributions and to benefit from any employer contributions to the scheme. Accrued benefits will continue of course.
However, they will no longer be able to benefit from any rebate of NICs. This is important as it will kill the majority of such schemes dead.
The pensions Green Paper presented to the House of Commons in April 2011 included proposals for the introduction of a much higher universal basic pension, part-financed by scrapping the additional pension (S2P) and with it the ability to contract out. But the Pensions Minister told the HoC that Serps and S2P benefits pension savers had accrued would be preserved.
buildersmate,when you say " Those people contracted out through such a scheme will be able to continue to make their own contributions and to benefit from any employer contributions to the scheme"
Does that mean it will not be took from his wages as it is at present but that he will have to pay in independently,if this is the case how will his employer know how much to contribute?
Does that mean it will not be took from his wages as it is at present but that he will have to pay in independently,if this is the case how will his employer know how much to contribute?
Kloof
Under the previous legislation, there was a rebate that the employer could claim of part of the NI contribution that goes into Government coffers and funds the S2P (if one is contracted-in).
The Government is now proposing that you can't be contracted-out - every employee has to be in the State scheme. It is all part of changing the pension provided by the State such that there is a raise in the minimum pension paid to anyone with the necessary 30 years of contributions.
For those who are in private or company schemes, employees may decide to continue to offer these - to further top-up employees benefits on retirement. But since the NI rebate can't be claimed back anymore, the value of benefits at the end will be less, because less is going into the scheme.
It will be up for employers to decide what to do with their schemes - so I can't answer your question.
That is my understanding of what is going on - others please comment if you think I've got it wrong.
Under the previous legislation, there was a rebate that the employer could claim of part of the NI contribution that goes into Government coffers and funds the S2P (if one is contracted-in).
The Government is now proposing that you can't be contracted-out - every employee has to be in the State scheme. It is all part of changing the pension provided by the State such that there is a raise in the minimum pension paid to anyone with the necessary 30 years of contributions.
For those who are in private or company schemes, employees may decide to continue to offer these - to further top-up employees benefits on retirement. But since the NI rebate can't be claimed back anymore, the value of benefits at the end will be less, because less is going into the scheme.
It will be up for employers to decide what to do with their schemes - so I can't answer your question.
That is my understanding of what is going on - others please comment if you think I've got it wrong.
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