Ending contracting-out of the State Second Pension

Closed 1 Sep 2017

Opened 7 Jul 2017

Feedback Updated 8 Mar 2018

We Asked

Our consultation paper sought the views of employers and scheme trustees who operate contracted-out pension schemes, and the views of employees who are members of such pension schemes, as to how Treasury could minimise any adverse impact that the ending of the current contracted-out arrangements may have.  The consultation asked a number of questions and invited comments and suggestions on the proposals.

You Said

We received a total of 33 responses from a variety of interested parties. Of these, some responded to the questions raised in the consultation document while others commented more generally on the subject.  It was noted from a number of responses received from individuals who are currently members of contracted-out schemes that some are not aware of how contracting-out affects their entitlement to the current state pension. 

We Did

Following a review of the responses received, Treasury proposes that the procedures for scheme reconciliation that were adopted in the UK will also be adopted in the Island.  This will minimise the cost and administrative burden for schemes and for the Treasury.  In addition, Treasury will work with schemes to ensure that members are made aware of their contracted-out periods and how this will affect their entitlement to the new Manx pension. 

Results Updated 8 March 2018

The response document is provided below and includes a summary of the responses made to each question and of the other comments received.

Results Updated 8 Mar 2018

 

 

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Overview

The Treasury is seeking feedback about the possibility of ending the scheme which allows some employers and employees to pay a lower rate of National Insurance contribution because they are in occupational pension schemes.

Why We Are Consulting

With the introduction of the new Manx State Pension from 6 April 2019 the Additional State Pension will cease and therefore the rationale for the current contracting-out rebate will also cease, as everyone will start to build up entitlement to the State Pension on an equal basis.

Treasury believes that ending the current contracting-out scheme will simplify the new Manx State Pension by removing the difficulty in providing accurate estimates of State Pension entitlement, reducing the number of different National Insurance rates paid by employers and employees and ensuring that all individuals build up equal entitlement to the new Manx Pension going forward.

This consultation seeks the views of employers and scheme trustees who operate contracted-out schemes and employees who are members of such schemes as to how Treasury can minimise any adverse impact that the ending of the current contracted-out arrangements may have.

Areas

  • All Areas

Audiences

  • Employees
  • Self-employed
  • Business owner

Interests

  • Policies, strategies & plans
  • Tax
  • Pensions