- contracted-out
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An employer can contract out of the SERPs element out of the state pension scheme (hence qualifying for a contracted-out rebate on NIC's ) by means of an occupational pension scheme. There are strict rules relating to occupational pension schemes generally and contracting-out. Benefits under a contracted-out scheme must be at least as good as SERPs benefits and such schemes must ensure a "guaranteed minimum pension". An occupational pension scheme need not be contracted out. Occupational pension schemes set up by smaller companies are often insured - whereby an insurance company takes over all responsibilities in return for a premium.
Easyform Glossary of Law Terms. — UK law terms.
- contracted-out
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Employment which is contracted-out of the state second pension (S2P) (formerly the state earnings-related pension scheme (SERPS)). Members of contracted-out schemes forego their S2P or SERPS pensions and instead are provided with minimum benefits under their employer's pension scheme. Both members and employers pay lower national insurance contributions (NICs) if they participate in a contracted-out scheme (contracted-out money purchase scheme). National Insurance Services to Pensions Industry (NISPI) is responsible for supervising contracted-out schemes and issues contracting-out certificates.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
