National Insurance Services to the Pensions Industry (NISPI) Frequently Asked Questions

Am I Contracted-out?

If you are in any doubt about whether you are a member of a Contracted-out Pension Scheme, contact you r employer or the Scheme Administrator direct. If you are still unsure, contact the Contracted-out Helpline on: 084591 50150.

What are the benefits of Contracting-out of the State Earnings Related Pension scheme (SERPS)/State Second Pension (SP2) scheme?

Members of Contracted-out occupational pension schemes, for example Contracted-out Salary Related (COSR), Contracted-out Money Purchase (COMP) or Contracted-out Mixed Benefit (COMB) schemes, pay a lower rate of National Insurance contributions. The employer also pays a lower rate of National Insurance contributions. If you are Contracted-out through an Appropriate Personal pension (APP) scheme, you will continue to pay full rate National Insurance contributions, but the HMRC will pay to the provider on your behalf, the difference between the Contracted-out and non Contracted-out rates. You can obtain advice on what option is best for you by contacting an independent financial adviser.

I pay full rate NI contributions, even though I am in a Contracted-out scheme. Is this correct?

As long as you are a member of an APP scheme and do not enter a Contracted-out occupational pension scheme during this time, you will continue to pay full rate National Insurance contributions. HMRC will pay the provider of your pension, on your behalf, the difference between this higher rate and the lower Contracted-out rate.

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How do I go about Contracting-out of the State Second Pension?

There are various ways that you can Contract-out of the State Second Pension. You may be able to join an employer’s occupational scheme if they have one. Alternatively you can Contract-out through APP scheme or an APPSHP scheme. The APP/APPSHP schemes are usually administered by insurance companies, banks, building societies or friendly societies. You should contact them direct for advice or speak to an independent Financial Adviser.

At what stage should I apply to re-join the State Second Pension?

You need to seek advice from your employer, scheme administrator or an Independent Financial Adviser. You may re-join the State Second Pension at any time. If you have an APP, you should ask for form CA1543 from your pension provider.

Do I have to Contract –out of the State Second Pension if my employer runs an occupational pension scheme?

You do not have to Contract-out unless you want to do so.

I have heard about Age Related Rebates. What are they and who do they apply to?

Age Related Rebates or (ARRs) were introduced to make Contracting-out of the State Second Pension more attractive. From 6 April 1997 APP and COMP scheme members receive rebates on their National Insurance contributions, based on an employee’s age on 5 April, immediately before the tax year being calculated. From 6 April 2001 APPSHP and COMP SHP schemes receive this rebate.

Am I allowed to re-join the State Second Pension at any time?

Yes. You may re-join the State Second Pension at any time, although it may not always be the best option for you. If you have an APP, you should request form CA1543 from your insurance company. You can seek advice from your employer, the scheme administrator or an independent financial adviser.

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Do I have to contract-out of the State Second Pension if my employer runs a COSR, COMP or COMB scheme?

You do not have to contract-out unless you want to.

What is Pension Sharing on Divorce and when did it start?

Pension sharing on divorce will allow divorcing couples the option to share their pension assets as a part of the overall divorce settlement. The implementation date was 1 December 2000.

Safeguarded rights are rights of a scheme member derived from membership of a Contracted-out occupational or APP scheme which are transferred to the former spouse as a result of a pension sharing order or agreement.

Scheme rules can specify whether all of the accrued rights are that are subject to a pension share become safeguarded rights, therefore safeguarded rights may include some non Contracted-out rights. For further information please see Pension Sharing on Divorce.