(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
Where a member is in a contracted-out scheme, Social Security legislation places particular requirements on the member’s contracted-out benefit rights (See PSI6.1.10-11). For example the rate of increase the scheme must apply to a Guaranteed Minimum Pension (GMP) in payment might not have to be applied to any pension paid in addition to the GMP, sometimes known as the excess over GMP. If a pension credit benefit is derived from a contracted-out benefit, the particular requirements that would have applied to that contracted-out benefit will continue to apply in broad terms to the pension credit benefit. A pension credit benefit to which contracting- out requirements continue to apply is known as a safeguarded right under Social Security legislation. Like the Social Security requirements that apply to an employee’s contracted-out benefits, the Social Security requirements that apply to safeguarded rights take precedence over normal Revenue limits.
