termination of contracted-out employment manual

Termination ofContracted-outEmploymentManual for:Salary Related Pension Schemes andSalary Related Parts of Mixed Benefits Schemes

National Insurance Contributions SeriesCA 14

Contents

Abbreviations page 6

Glossary of terms page 8

Chapter 1Introduction to this manual and Inland Revenue National Insurance Contributions Office page 11

About this manual page 11, para 1.1Responsibilities and contacts page 12, para 1.5Enquiry services page 17, para 1.16Annual GMP/CEP reconciliation check page 20, para 1.35Tracing services page 21, para 1.42Additional information/services page 21, para 1.45

Chapter 2Background to Contracting-out page 22

Pensions page 22, para 2.1Contracting-out page 22, para 2.5Changes from 6 April 2001 page 23, para 2.7Incentive payments - 6 April 1988 to 5 April 1993 page 26, para 2.16

Chapter 3Introduction to termination of contracted-out employment page 27

When is contracted-out employment treated as terminated? page 27, para 3.1When is contracted-out employment not treated as terminated? page 28, para 3.2Circumstances where there is a change of employer, but the employee’s contracted-out employment is treated as not having terminated page 29, para 3.8Special cases page 29, para 3.10Contribution liability when an employee’s contracted-out employment terminates page 31, para 3.21

Chapter 4Information about notifying termination of contracted-out employment page 33

Notifying Services to Pensions Industry page 33, para 4.1Responsibility for notification page 33, para 4.4When is a notification of termination of contracted-out employment not required? page 34, para 4.5Time limit for notifications page 34, para 4.6Guidelines for completion of notifications page 34, para 4.8Notifying termination if employee goes abroad page 36, para 4.12Notifying termination if employee is in concurrent contracted-out employments page 37, para 4.16Deferred payment of contributions page 38, para 4.26Change of ECON page 38, para 4.32Holding companies page 39, para 4.38Maternity leave page 39, para 4.40Change in method of preservation page 40, para 4.51Change of Responsible Paying Authority (RPA) for GMP and Post ‘97 COSR Rights page 40, para 4.53Married women and widows paying reduced-rate contributions page 40, para 4.55

Chapter 5Calculating Guaranteed Minimum Pension (GMP) page 41

General page 41, para 5.1Earnings factors page 42, para 5.6Revaluation of earnings factors page 43, para 5.18

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Chapter 6Revaluing Guaranteed Minimum Pension (GMP) page 43

Background page 43, para 6.1Method of revaluation page 44, para 6.5Using limited rate (only available if the period of contracted-out employment ends on or before 5 April 1997) page 44, para 6.8Calculating the LRP page 45, para 6.11Calculating the MLI page 45, para 6.13Notifying Services to Pensions Industry page 46, para 6.19Responsibility for paying an LRP page 46, para 6.21Time limits for paying LRPs page 46, para 6.24Using a fixed rate page 47, para 6.28

Chapter 7Guaranteed Minimum Pension (GMP) anti-franking legislation requirements page 48

GMP anti-franking legislation requirements page 48, para 7.1Those protected by the legislation page 48, para 7.2Circumstances in which a member’s benefit is protected page 48, para 7.3Pension provision for a scheme member page 48, para 7.4Circumstances in which a widow’s or widower’s benefit is protected page 49, para 7.5Pension provision for widows or widowers page 49, para 7.6Exemptions from the legislation page 50, para 7.7Short service benefit page 50, para 7.8

Chapter 8Buying back Guaranteed Minimum Pension (GMP) rights and/or Post ‘97 Contracted-out Salary Related (COSR) rights into the state scheme page 51

What is a CEP? page 51, para 8.2Conditions for payment of a CEP page 51, para 8.4Time limits for payment of CEPs page 52, para 8.6Calculation of a CEP page 53, para 8.12Notifying Services to Pensions Industry page 55, para 8.18Calculation of payment by Services to Pensions Industry page 55, para 8.21How to pay a CEP page 55, para 8.22Refund of a CEP page 57, para 8.32When can a TP be paid? page 60, para 8.51Calculating a TP page 61, para 8.60Notifying Services to Pensions Industry of the intention to pay a TP page 62, para 8.65

Chapter 9Transferring Guaranteed Minimum Pension (GMP) rights and/or Post ‘97 Contracted-out Salary Related (COSR) Rights to other schemes page 63

Employee’s right to a transfer value page 63, para 9.1Employee’s rights on termination of contracted-out employment page 64, para 9.10What schemes can GMP Rights and/or Post ‘97 COSR Rights be transferred to? page 64, para 9.13Consent to a transfer page 65, para 9.15Transfer to a COSR scheme or the active COSR part of a COMB scheme or a Section 53 (formerly contracted-out) Salary Related scheme page 65, para 9.19Notification to use if the employee is not in contracted-out employmentunder the receiving scheme page 68, para 9.33Transfer to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme or a Section 53 (formerly contracted-out) Money Purchase scheme page 69, para 9.36Transfer to the active COMP or COSR part of a COMB scheme page 70, para 9.43Transfer to an APP/APPSHP scheme page 70, para 9.46Transfer to an overseas occupational pension scheme or overseas arrangement other than one which is or was contracted-out andstill under the financial supervision of Services to Pensions Industry page 72, para 9.52

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Transfer to an overseas scheme which is or was contracted-out and is still under the financial supervision of Services to Pensions Industry page 73, para 9.60Splitting the GMP and/or Post ‘97 COSR Rights page 73, para 9.62Incoming transfer from a COMP/COMPSHP or APP/APPSHP scheme page 74, para 9.70

Chapter 10Buying out a Guaranteed Minimum Pension (GMP) and/or Post ‘97 Contracted-out Salary Related (COSR) Rights page 75

When can a buy-out take place? page 75, para 10.1Conditions for a buy-out page 75, para 10.4Buy-out without consent page 76, para 10.5Notifying Services to Pensions Industry page 76, para 10.7Transferring bought-out GMP and/or Post ‘97 COSR Rights page 77, para 10.12Transfer to a COSR scheme or the active COSR part of a COMB scheme page 77, para 10.15Transfer to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme page 78, para 10.17Transfer to an Appropriate Personal Pension (APP)/APPSHP scheme page 78, para 10.19Transfer to an overseas scheme or an overseas arrangement page 79, para 10.22

Chapter 11Contracted-out Mixed Benefit (COMB) schemes page 80

Background page 80, para 11.1Schemes operating an active COMP and COSR part page 80, para 11.3COSR schemes switching to COMP status from 6 April 1997 page 80, para 11.8COMB schemes operating both active COMP and COSR parts page 81, para 11.11Notifications of termination of employment within a COMB scheme page 81, para 11.13Notifications to use page 81, para 11.18Internal transfers between parts of a COMB scheme page 82, para 11.21Internal transfer of membership and accrued GMP and/or Post ‘97 COSR Rights from the COSR part to the active COMP part of the same COMB scheme page 82, para 11.24Internal transfer of membership only from the COSR part to the active COMP part of a COMB scheme and previously accrued COSR rights are retained in the COSR part of the COMB scheme page 83, para 11.26Accrued rights retained in the COMB scheme on termination page 84, para 11.36Buying back GMP rights and Post ‘97 COSR Rights into the state scheme page 84, para 11.40GMP rights and/or Post ‘97 COSR Rights only have accrued in the COMB scheme page 85, para 11.43GMP and/or Post ‘97 COSR Rights and protected rights have accrued in the COMB scheme page 85, para 11.44Transfers of rights accrued in a COMB scheme to another COMB, COSR, COMP/COMPSHP or APP/APPSHP scheme page 86, para 11.49Transfer of rights accrued in a COMB scheme to the active COSR part of another COMB scheme or COSR scheme page 86, para 11.51Previous GMP transfer with Section 148 revaluation page 87, para 11.54Previous GMP transfer with fixed or limited rate revaluation page 87, para 11.55Transfer of rights accrued in a COMB scheme to the active COMP part of another COMB scheme or COMP/COMPSHP scheme page 88, para 11.63Transfer of rights accrued in a COMB scheme to an APP/APPSHP scheme page 90, para 11.70Notification to use if the employee is not contributing to that APP/APPSHP scheme page 91, para 11.74Transfer from an active COSR part of a COMB scheme to an overseas occupational pension scheme, other than one which is or was contracted-out and still under the financial supervisionof Services to Pensions Industry page 91, para 11.76Buying-out a GMP and/or Post ‘97 COSR Rights page 91, para 11.79Splitting the rights accrued in a COMB scheme page 91, para 11.80

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Chapter 12Providing a pension at retirement or death page 92

General page 92, para 12.1Effect on State Retirement Pension page 92, para 12.3Providing a pension page 92, para 12.4Payment of the GMP is deferred page 93, para 12.9Trivial Commutation page 93, para 12.14Inflation-proofing the pension page 94, para 12.18Widow and widower inheritance provisions page 95, para 12.22

Chapter 13 - Statements page 96Guaranteed Minimum Pension (GMP) statements page 96, para 13.1Employee leaves contracted-out employment before SPA page 97, para 13.5Statements issued when employee, or former employee, reaches SPA page 97, para 13.11Widow’s entitlement page 98, para 13.15Widower’s entitlement page 99, para 13.22Protected rights statements/notices page 100, para 13.24Buy-out of a GMP page 100, para 13.27Transfer statements page 101, para 13.28

Chapter 14The Dual Guaranteed Minimum Pension (GMP) Calculation Facility page 102

Background page 102, para 14.1How the facility works page 102, para 14.7The information you will receive page 103, para 14.10

Chapter 15 Pensions Sharing on Divorce page 104

Background page 104, para 15.1Safeguarded Rights page 104, para 15.5Calculation Service page 105, para 15.12Pension Sharing on Divorce Notification page 105, para 15.15Contracted-out Deduction page 105, para 15.20Statement of GMP Liability page 105, para 15.21

AppendicesAppendix 1

Contracted-out Salary Related (COSR) forms page 106

Appendix 2Statements/notifications issued page 109

Appendix 3Tables page 111List of Tables page 111Table 1 Revaluation factors page 112Table 2 Composite divisors for tax years up to and including 1987/88 page 113Table 3 Composite divisors for tax years from 1988/89 page 114Example 1 TP calculation page 116Table 4 Transfer Premium (TP) page 117

• the event giving rise to the liability occurred before 6/4/88, and• the scheme operates Section 148, or fixed rate revaluation, or • no revaluation is required

Table 5 Transfer Premium (TP) page 118• the event giving rise to the liability occurred before 6/4/88, and• an LRP has already been paid

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Table 6 Transfer Premium (TP) page 119• the event giving rise to the liability occurred after 5/4/88

and before 6/4/93, and• the scheme operates Section 148, or fixed rate revaluation, or • no revaluation is required

Table 7 Transfer Premium (TP) page 121• the event giving rise to the liability occurred after 5/4/88

and before 6/4/93, and• an LRP has already been paid

Table 8 Transfer Premium (TP) page 123• the event giving rise to the liability occurred after 5/4/93, and• the scheme operates Section 148 or fixed rate revaluation, or • no revaluation is required

Table 9 Transfer Premium (TP) page 125• the event giving rise to the liability occurred after 5/4/93, and• an LRP has already been paid

Example 2 Limited Revaluation Premium (LRP) calculation page 127Table 10 Limited Revaluation Premium (LRP) page 128

• the event giving rise to the liability occurred before 6 /4/88Table 11 Limited Revaluation Premium (LRP) page 129

• the event giving rise to the liability occurred after 5/4/88 and before 6/4/93

Table 12 Limited Revaluation Premium (LRP) page 131• the event giving rise to the liability occurred after 5/4/93

Appendix 4Examples of calculations page 133List of examples page 133 Example 1 Early leaver GMP - where the period of employment

is entirely pre 6 April 1997 page 134Example 1A Early leaver GMP - where the period of employment spans 6 April 1997 page 135Example 2 Retirement GMP - where the period of employment is

entirely pre 6 April 1997 page 136Example 2A Retirement GMP - where the period of employment spans 6 April 1997 page 138Example 3 Member’s GMP - where the period of employment is entirely

pre 6 April 1997 (member is deceased) page 140Example 3A Member’s GMP - where the period of employment spans

6 April 1997 (member is deceased) page 142Example 4 Contributions Equivalent Premium (CEP) page 144Example 4A CEP including previous transfer from a COMP/COMPSHP scheme or

COMP part of a COMB scheme page 145Example 5 Certified Amount page 146Example 5A Certified amount if tax year 2000/01 onwards is involved page 147Example 5B Certified amount where there has been a transfer from a COMP/COMPSHP

scheme or COMP part of a COMB scheme page 148Example 6 Inflation-proofing of the GMP page 149Example 7 Calculation of GMP increments where payment of GMP is deferred past SPA page 150

Appendix 5How membership of a Contracted-out Salary Related (COSR) scheme or COSR part of a Contracted-out Mixed Benefit (COMB) scheme affects State Additional Pension page 151Introduction page 151Deductions from the Additional Pension for the member page 151Deductions from the Additional Pension for the widow or widower page 151

Appendix 6Examples of Dual Guaranteed Minimum Pension (GMP) calculations page 152List of examples page 152True sex female page 153True sex male page 156

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Appendix 7Leaflets page 159

Appendix 8COSR early leaver termination, transfer, buy out and change of Responsible Paying Authority (RPA) notifications page 160Quick Reference Guide page 160

Appendix 9Status of Accrued Pension Rights on transfer to another COSR, COMP/COMPSHP, COMB or APP/APPSHP scheme page 162Quick Reference Guide page 162

Alphabetical index page 163

Abbreviations

AGLS Accrued Guaranteed Minimum Pension Liability Service

AP Additional Pension

APP Appropriate Personal Pension

APPSHP Appropriate Personal Pension Stakeholder Pension

ARR Age-Related Rebate

ASCN Appropriate Scheme Contracted-out Number

CEP Contributions Equivalent Premium

COCIS Contracted-out Contribution Information Service

COD Contracted-out Deductions

COMB Contracted-out Mixed Benefit

COMP Contracted-out Money Purchase

COMPSHP Contracted-out Money Purchase Stakeholder Pension

COSR Contracted-out Salary Related

DWP Department for Work and Pensions

EC European Community

ECJ European Court of Justice

ECON Employer’s Contracting-out Number

EPB Equivalent Pension Benefit

ET Earnings Threshold

FRY Final Relevant Year

GB Great Britain

GMP Guaranteed Minimum Pension

IR Inland Revenue

LEL Lower Earnings Limit

LRP Limited Revaluation Premium

MC Minimum Contributions

MLI Market Level Indicator

NICs National Insurance contributions

NINO National Insurance number

OPB Occupational Pensions Board

OPRA Occupational Pensions Regulatory Authority

PAYE Pay As You Earn

PSA Pension Scheme Act 1993

RPA Responsible Paying Authority

RPI Retail Price Index

S148 Section 148 of the Social Security Administration Act 1992

SCON Scheme Contracted-out Number

SERPS State Earnings Related Pension Scheme

SHP Stakeholder Pension

SMP Statutory Maternity Pay

SPA State Pension Age

TP Transfer Premium

UEL Upper Earnings Limit

UK United Kingdom

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Glossary of terms

Accrued rights Also known as accrued benefits. Generally, the right to future benefits which a member of anoccupational pension scheme has built up in respect of service up to a given point.

Additional Pension (AP) The Additional Pension (AP), is the earnings related part of the State RetirementPension. It is also known as the State Earnings Related Pension Scheme (SERPS) or as from 6 April2002, State Second Pension. It is based on earnings on which National Insurance contributions(NICs) have been paid since April 1978. Employees are automatically in SERPS, or State SecondPension from 6 April 2002, unless they contract-out via an occupational scheme or an AppropriatePersonal Pension (APP). Anyone who is, or has been, a member of a contracted-out scheme willhave their AP reduced accordingly.

Age-Related Rebate (ARR) The Inland Revenue National Insurance Contributions Office makes payments intoan APP, COMP or COMP section of a COMB scheme from April 1997, APPSHP & COMP SHP schemesfrom 6 April 2001. These increase with the age of the member and will reflect the different amountsof rebate needed at different ages to generate the same benefits as the SERPS or State Second Pensionfrom 6 April 2002.

Annuity A pension bought-out by a pension scheme from an insurance company, for either immediate ordeferred payment.

Appropriate Personal Pension (APP) scheme A personal pension scheme which an individual may joinas a means of contracting out of State Second Pension previously known as SERPS. To obtain anappropriate scheme certificate from the Secretary of State for the Department of Work and Pensions,the personal pensions scheme needs to satisfy certain conditions about the provision ofprotected rights.

Appropriate Personal Pension Stakeholder Pension (APPSHP) scheme An Appropriate Personal Pensionscheme which operates on the same basis as an APP scheme but with Stakeholder status.

Buying back Restoration of State Additional Pension entitlement.

Common fund A fund into which all contributions, however derived, are paid and all of which is available formeeting the cost of benefits.

Contracted-out An arrangement under which members of a pension scheme which meets certain conditions,obtain rights in that scheme in place of their State Additional Pension entitlement. National Insurancecontributions for these employees are reduced or, in the case of an APP/APPSHP, partly repaid tothe scheme.

Contracted-out earnings Those earnings which fall between the Lower Earnings Limit (LEL) and the UpperEarnings Limit (UEL).

Contracted-out Rebate Employers who operate Contracted-out pension schemes pay NICs at a reduced(contracted-out) rate. The difference between the full not contracted rate and the reduced rate isknown as “Contracted-out rebate”.

Contracted-out Mixed Benefit (COMB) scheme An occupational pension scheme which holds both COMPand COSR rights. COSR rights may be GMPs for service before 6 April 1997 or post ‘97 COSR rightsafter that date.

Contracted-out Money Purchase (COMP) scheme An occupational pension scheme where the employerpays minimum payments which, along with any other contributions from the employer and/or member, provide the member with a pension based on the value of his or her fund at retirement.

Contracted-out Money Purchase Stakeholder (COMPSHP) scheme A contracted-out occupational pensionscheme which operates on the same basis as a COMP scheme but with Stakeholder status.

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Contracted-out Salary Related (COSR) scheme A contracted-out occupational pension scheme whichprovides members with a pension related to their earnings.

Dual calculation A facility provided by Services to Pensions Industry which gives the GMP calculations at boththe male and female accrual rate for individual members of a contracted-out pension scheme, for anyperiod(s) between 6 April 1990 and 5 April 1997.

Employee and Employer Earnings Thresholds The employer threshold was introduced in April 1999. It setthe level of earnings which had to be exceeded before employer NICs became payable. The employeeearnings threshold was introduced from April 2000 but was set at a different level to the employerthreshold. From April 2001 the employee and employer thresholds were set at the same level.

Former spouse A person who may acquire accrued pension rights under a pension share.

Guaranteed Minimum Pension (GMP) rights The minimum pension which a salary-related occupationalscheme must pay a member in respect of contracted-out contributions paid between April 1978 andApril 1997, as a condition of contacting out. (Replaced by the Reference Scheme Test forcontributions paid after April 1997.)

Increments Addition to pension as a result of delayed retirement.

Insurance Company An Insurance Company authorised to carry on long term business as such under theInsurance Companies Act 1982.

Lower Earnings Limit (LEL) The minimum amount set at the beginning of each tax year, which must beearned in a pay period to qualify for a basic Retirement Pension.

NIC Rebate Following the introduction of the earnings threshold, no NICs are payable on earnings betweenthe Lower Earnings Limit (LEL) and the earnings threshold, however a contracted-out rebate is still dueon this band of earnings.

Normal pension age Age at which occupational pension normally becomes payable.

Overseas arrangement A scheme or arrangement other than an occupational pension scheme, which willprovide benefits on termination of employment, or on death or retirement. It is not an APP schemeand is administered wholly or primarily outside the United Kingdom (UK).

Overseas scheme An occupational pension scheme established under irrecoverable trust, or by such othermeans as the Commissioners of Inland Revenue may approve, and which is administered wholly orprimarily outside of the UK as defined in Regulation 1 of the Occupational Pension Schemes(Contracting-out) Regulations 1996.

Pension Sharing on Divorce A term used where the courts agree or order that, on divorce or nullity pensionrights are to be shared.

Post ‘97 COSR Rights A member’s rights derived from being a contracted-out member of a scheme contracted-out on a salary related basis, on or after 6 April 1997 and any post ‘97 COSR rights or post ‘97 protected rights which have been transferred to the scheme from a COSR scheme,COMP/COMPSHP scheme, COMB scheme or APP/APPSHP scheme, but excluding any rights derivedfrom additional voluntary contributions paid for the member, ie Section 9 (2B) rights as defined inRegulation 1 of the Occupational Pension Schemes (contracting out) Regulations 1996.

Protected rights Protected rights are the member’s total rights to money purchase benefits under the scheme,unless the scheme rules make separate provision. If the scheme rules do separately provide, then thefollowing have to be included in the scheme rules as protected rights:

• minimum payments

• age-related payments including any made as a result of a transfer from a COMP/COMPSHPscheme or the active COMP part of a COMB scheme

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• incentive payments including any made as a result of a transfer from a COMP/COMPSHP scheme

• protected rights transferred in from another COMP/COMPSHP scheme or the COMP part of aCOMB scheme or from an APP/APPSHP scheme

• GMP or post ‘97 COSR rights transferred in from a COSR scheme or the active COSR part of aCOMB scheme.

Reference scheme The scheme prescribed in Section 12B of the Pension Schemes Act 1993.

Responsible Paying Authority (RPA) An occupational pension scheme or other body, eg an insurancecompany, responsible for paying a GMP, or protected rights.

Safeguarded Rights Rights as defined in Section 68(A) of the Pension Scheme Act of 1993.

Section 53 schemes A scheme formerly certified under Services to Pensions Industry/financialsupervision arrangements.

Section 148 The rate of revaluation set out in an order made under Section 148 of the Social SecurityAdministration Act 1992.

Stakeholder Pension Scheme A pension scheme that has been registered under section 2 of the WelfareReform Pension Act 1999 and satisfies the conditions in section 1 of that act.

State Earnings Related Pension Scheme (SERPS) A term used to describe the AP provision of the statepension scheme accrued up to 5 April 2002, see ‘Additional Pension’.

State Pension Age (SPA) The minimum prescribed age which a person must be before they can be paid aState Retirement Pension.

State Second Pension A term used to describe the AP provision of the state pension scheme accrued from6 April 2002, see ‘Additional Pension’.

Transfer payment A payment of GMP, post ‘97 COSR rights or protected rights made by a COSR,COMP/COMPSHP, COMB or APP/APPSHP scheme to either:

• another occupational pension scheme, or

• an APP/APPSHP scheme.

Transfer value Value of the benefit to which a member is entitled on transferring to another occupational orpersonal pension scheme.

Upper Earnings Limit (UEL) NICs do not have to be paid by employees on earnings over a certain amount.This maximum amount is set at the beginning of each tax year and is about seven times the amountof the LEL. There is no UEL for employers.

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Introduction to this manual and Inland RevenueNational Insurance Contributions Office

About this manual

1.1 This manual:

• is one of two manuals which has replaced the earlier version of manual CA14 Termination ofContracted-out Employment Manual (April 1999)

• is intended for employers and administrators of Contracted-out Salary Related (COSR) occupational pension schemes or COSR parts of Contracted-out Mixed Benefit (COMB) pension schemes whose members are contracted-out of the additional state pension, from 6 April2002 SERPs was reformed by State Second Pension

• contains guidance on what to do when an employee has left a COSR pension scheme, or theCOSR part of a COMB scheme, and the period of contracted-out employment was

- entirely pre 6 April 1997

- both pre and post 6 April 1997

- entirely post 6 April 1997.

1.2 This manual does not deal with procedures relating to

• Contracted-out Money Purchase (COMP) schemes or the COMP part of COMB schemes. Details of COMP procedures are covered in manual CA14A Termination of Contracted-outEmployment - manual for Money Purchase Pension Schemes and Money Purchase Parts of MixedBenefit Schemes, or

• occupational pension schemes which cease to contract-out. Details on the procedures to followwhen a scheme ceases to contract-out are covered in manual CA15 Cessation of Contracted-OutPension Scheme Manual, or

• Stakeholder Pension schemes. Details of Stakeholder Pension procedures are covered in manualCA84 Stakeholder Pension Scheme Manual - Procedural Guidance.

1.3 This manual gives general guidance only and should not be treated as a complete and authoritativestatement of the law.

1.4 You can get more copies of this and other manuals mentioned above from

✉ Inland RevenueNational Insurance Contributions OfficeServices to Pensions IndustryBenton Park ViewNewcastle upon TyneNE98 1ZZ

� 08459 150 150 Lines open 8am to 5pm Monday to Friday.

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11

Responsibilities and contacts

Inland Revenue - National Insurance Contributions Office

1.5 The Inland Revenue National Insurance Contributions Office

• has a Director who is responsible to the Director General of Operations in Inland Revenue

• operates the National Insurance scheme, the second largest source of Government revenue afterIncome Tax, by

- ensuring compliance with the law relating to National Insurance

- maintaining over 60 million contributors’ National Insurance records

- providing an information and advisory service to the business community and members of the public

- providing National Insurance information to benefit paying Agencies

- administering the contracting-out arrangement.

Services to Pensions Industry

1.6 Services to Pensions Industry is part of the Inland Revenue National Insurance Contributions Office.

Services to Pensions Industry:

• considers elections from employers who wish to contract-out of the additional state pension,commonly known as the State Earnings Related Pension Scheme (SERPS) or State Second Pensionand issues contracting-out certificates if the election is accepted for Contracted-out Salary Related(COSR), Contracted-out Money Purchase (COMP), Contracted-out Mixed Benefit (COMB), andAppropriate Personal Pensions (APP) schemes

• issues revised certificates where elections to vary a contracted-out certificate are made for aCOSR, COMP, COMB, APP scheme

• allocates Employer’s Contracting-out Numbers (ECONs) and Scheme Contracted-out Numbers(SCONs) for COSR, COMP, COMB, and Appropriate Scheme Contracted-out Numbers (ASCNs)for APP schemes

• supplies contracted-out employers/schemes who operate COSR, COMP, COMB, APPschemes with

- an information pack when the contracting-out certificate is first issued

- National Insurance contributions tables for contracted-out employers who operate all contracted-out schemes

• supervises COSR, COMP, COMB, APP schemes to ensure

- their resources meet their contracted-out and safeguarded rights liabilities, and

- they continue to satisfy the conditions for contracting-out

• has the authority to cancel or vary contracting-out certificates for COSR, COMP, COMB, APPschemes on behalf of the Commissioners of Inland Revenue

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• approves and supervises a scheme’s arrangements of COSR, COMP, COMB schemes if they ceaseto contract-out

• has the power to withdraw/refuse approval of arrangements for COSR, COMP, COMB schemes

• has the power to issue certificates of non-approval and directions to discharge liabilities for COSR,COMP, COMB schemes

• registers, cancels and terminates contracted-out employment for all contracted-outscheme optants

• ensures all necessary arrangements are made for individuals if any contracted-out schemes ceasesto contract-out

• supplies forms mentioned in this guide

• deals with procedures for registration and payment of Age-Related Rebates (ARRs) for COMP,COMB, APP and APPSHP schemes

Any enquiries about the procedures performed within Services to Pensions Industry should beforwarded to


All notifications should be sent to the address quoted on the appropriate form.

Or you can also visit Services to Pensions Industry’s website at www.inlandrevenue.gov.uk/coeg

Department for Work and Pensions (DWP)

1.7 Department for Work and Pensions (DWP) Headquarters deals with matters of policy relating tocontracted-out schemes.

Send all enquiries in writing to

✉ Department for Work and PensionsBranch PP1The Adelphi1-11 John Adam StreetLondonWC2N 6HT

Occupational Pensions Regulatory Authority (OPRA)

1.8 OPRA

• is an executive non departmental public body accountable to Parliament

• regulates occupational pensions and APPSHP schemes

• has the authority to investigate schemes and take action to uphold the law

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• has the responsibility for running the Pensions Schemes Registry

• does not deal with personal pension schemes.

Send any enquiries to

✉ Occupational Pensions Regulatory AuthorityInvicta HouseTrafalgar PlaceBrightonEast SussexBN1 4BY

Or you can visit OPRA’s website at www.stakeholder.opra.gov.uk

Further Information

1.9 If you need any further information about this manual please contact

✉ Inland RevenueNational Insurance Contributions OfficeServices to Pensions IndustryRoom BP4102Benton Park ViewNewcastle upon TyneNE98 1ZZ

You can get more copies of this manual from


� 08459 150 150

Lines are open 8am to 5pm Monday to Friday.

If you need further information about pensions you can order copies of the following Pension guides

Leaflet Title

PM1 A guide to your pensions options

PM2 State Pensions - Your guide

PM4 Personal Pensions - Your guide

PM5 Pensions for the self-employed - Your guide

PM6 Pensions for women - Your guide

PM7 Contracted-out pensions - Your guide

PM8 Stakeholder pensions - Your guide

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PP2 Making the most of your Personal Pension

PP4 A guide to the Financial Services Act for employers

PS02 Personal Pensions (including Stakeholder Pensions) a guide for members of tax approved schemes

You can get these free pension guides from

✉ DWP PensionsFREEPOST BS5555/1BristolBS991BL

� 08457 313 233

A textphone number is available on 0845 604 0210.

Lines are open 24 hours.

You can also order them online at www.dss.gov.uk

Leaflet PSO2 is only available from

✉ Inland Revenue(Savings, Pensions, Share Schemes)Yorke HousePO Box 62Castle Meadow RoadNottinghamN62 1BG

� 0115 974 1670

The information and instructions in this manual apply in Northern Ireland and the Isle of Man, withthe exception of SHP schemes, which are not available in the Isle of Man.

Employers with employees in contracted-out employment in the Isle of Man should contact

✉ DHSSSocial Security DivisionContributions SectionMarkwell HouseMarket StreetDouglasIsle of ManIM1 2RZ

� 01624 685 685


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1.10 Helplines

The following helplines are available for general queries:

Inland Revenue Contracted-out Pensions Helpline

� 08459 150 150


This helpline can answer your questions on contracted-out procedures.

Inland Revenue Pensions Technical Advice

� 0115 974 1777


This helpline can answer your questions on tax rules for all pension arrangements.

Occupational Pensions Regulatory Authority (OPRA)

� 01273 627 600


This helpline can answer your questions on the regulations on occupational pension andSHP schemes.

1.11 Additional Information

Comments on our service

We welcome any comments you have on how to improve our service to all customers, including yourfuture requirements and expectations. You can let the Customer Support Team know, by phone orby writing to

✉ Inland RevenueNational Insurance Contributions OfficeServices to Pensions IndustryRoom BP4102Benton Park ViewNewcastle upon TyneNE98 1ZZ

� 08459 150 250

We would also like to hear from you if you think you have received a particularly good service. Ifhowever you have a complaint, we will do our best to settle it quickly and to your satisfaction.

If you are unhappy with our service

If you are unhappy with any aspect of the service you have received from the Inland Revenue NationalInsurance Contributions Office, you should complain to the manager at the office you have beendealing with.

We have a range of services for people with disabilities, including leaflets in Braille, audio and largeprint. For details, please ask at your nearest Inland Revenue office or Enquiry Centre.

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Decision Making and Appeals

1.12 Following the implementation of the Social Security Act 1998, from 5 July 1999 Services toPensions Industry has followed the procedures for Decision Making and Appeals. This means thatwhen a formal decision is issued there is a right of appeal against that decision to an independentAppeal Tribunal. Further information can be found in manual CA14F Technical Guidance onContracted-out Decision Making and Appeals, which is available from Services to Pensions Industry,see paragraph 1.9.

Data Protection

1.13 Inland Revenue is a Data Controller under the Data Protection Act. We hold information for the purposes specified in our notification made to the Data Protection Commissioner, and may use thisinformation for any of them.

1.14 We may get information about you from others, or we may give information to them. If we do,it will only be as the law permits, to check accuracy of information, prevent or detect crime andprotect public funds.

1.15 We may check information we receive about you with what is already in our records. This can includeinformation provided by you as well as by others such as other government departments and agenciesand overseas tax authorities. We will not give information about you to anyone outside InlandRevenue unless the law permits us to do so.

Enquiry services

1.16 The Inland Revenue National Insurance Contributions Office provides enquiry services for

• checking members’ National Insurance numbers (NINOs) and dates of birth

• calculating Guaranteed Minimum Pension (GMP) and/or dual GMP liability for an individual employee

• calculating GMP liability for an individual, in a Pension Sharing on Divorce case. Chapter 15provides full information relating to Pension Sharing on Divorce and contracting-out procedures

• calculating accrued and/or dual GMP liability on a scheme basis

• providing contracted-out contributions/earnings information.

Check of members’ NINOs and dates of birth

1.17 NINOs and dates of birth of contracted-out scheme members can be checked against those held byInland Revenue National Insurance Contributions Office. This facility is normally free of charge.

1.18 Manual CA21 Using the National Insurance Number/Date of Birth Checking Service is available fromServices to Pensions Industry, see paragraph 1.9. Enquiries can be made on paper schedules ormagnetic media. To avoid delay, applications should be made

• between November and April, and

• at intervals of at least three years.

1.19 Dates of birth held by the Inland Revenue National Insurance Contributions Office are not alwaysverified, so employers and schemes must make sure the dates of birth they hold are correct.

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Individual GMP enquiry service

1.20 This service enables an individual employee’s GMP accrued on contracted-out earnings up to andincluding 5 April 1997 to be established at any time. This service is particularly helpful if

• at anytime during pension sharing on divorce procedures schemes wish to obtain GMP calculations

• GMP rights are to be transferred and the transferring scheme needs to know the accrued GMPamount before arrangements are finalised

• a GMP has already been preserved, but is now to be bought out and an up to date amountis required.

The transfer or buy-out must be notified to Services to Pensions Industry separately.

1.21 The Individual GMP enquiry service provides, on request

• GMP calculations for active members under State Pension Age (SPA)

• GMP calculations for early leavers

• GMP calculations for members who have reached SPA or the widows or widowers ofdeceased members

• dual GMP calculations for any period between 6 April 1990 and 5 April 1997.

1.22 The Dual GMP Calculation Facility outlined in Chapter 14 is intended to help schemes provide equaltreatment for men and women in the overall occupational pension to be paid for pensionable serviceafter 17 May 1990, as a result of the ruling by the European Court of Justice in the case of Barber versus Guardian Royal Exchange.

1.23 When a scheme uses this service to obtain dual GMP calculations a GMP amount will be quoted based on the true sex, covering the full period of contracted-out employment up to 5 April 1997 ifappropriate, plus a GMP amount based on

• the true sex for the period 6 April 1990 or commencement tax year, if later, up to and including 5 April 1997, if appropriate, and

• the opposite sex for the period 6 April 1990 or commencement tax year, if later, up to andincluding 5 April 1997, if appropriate.

1.24 Requests for the following calculations must be made to Services to Pensions Industry onform CA1604:

• individual GMP

• dual GMP

• GMP in a pension sharing case - Chapter 15 provides further information relating to PensionSharing on Divorce and contracting-out procedures

• Limited Revaluation Premium (LRP) for any period of contracted-out employment that terminatedon or before 5 April 1997

• Transfer Premium (TP) for any period of contracted-out employment where the date of election topay the TP is on or before 5 April 1997

• Contributions Equivalent Premium (CEP)

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The form must be signed by a duly authorised person, who quotes his/her official status, eg trustee ofthe scheme, scheme administrator.

1.25 If a scheme which performs its own GMP calculations agrees to accept a transfer from anotherscheme, information about earnings or contributions should normally be obtained from the exporting scheme.

1.26 If this information cannot be obtained because the period of contracted-out employment spannedmore than the period for which pay records have to be retained (three years), and

• the transfer has already taken place - earnings details will be supplied by Services toPensions Industry on application

• the transfer is still being negotiated - Services to Pensions Industry cannot supply earningsdetails unless the application is accompanied by a signed declaration from the individual schememember authorising the release of this information.

Note: If a signed declaration cannot be obtained, Services to Pensions Industry can only supply detailsof the weekly GMP amount.

1.27 An individual who is, or has been, a member of a pension scheme can request a GMP and/or a dualGMP calculation from Services to Pensions Industry. However a more useful calculation, quoting BasicRetirement Pension, State Second Pension, State Earnings Related Pension, Graduated RetirementPension and GMP entitlements can be obtained from the Retirement Pension Forecast Team, ThePension Service, Tyneview Park, Newcastle upon Tyne, NE98 1BA. Form BR19 can be obtained fromyour nearest DWP office or by calling 0845 3000 168 between the hours of 9am-5pm Monday toFriday. A Textphone is available on 0845 3000 169.

Accrued Guaranteed Minimum Pension Liability Service (AGLS)

1.28 COSR schemes may obtain information about their accrued GMP liability to assist actuaries in carryingout actuarial valuations required by Services to Pensions Industry.

1.29 The AGLS offers

• a facility to request GMP calculations for active members under SPA

• a facility to request GMP calculations for early leavers

• GMP calculations for members who have reached SPA or the widows or widowers ofdeceased members

• a facility to request dual GMP calculations for any period between 6 April 1990 and 5 April 1997,as outlined in Chapter 14.

1.30 This service is free of charge, subject to the conditions laid down in manual CA19 Using the AccruedGMP Liability Service, available from Services to Pensions Industry, see paragraph 1.9. Enquiries can bemade on paper schedules or magnetic media.

1.31 The service is also available to independent trade unions recognised for the purpose of collectivebargaining for members of the scheme. Trade unions should normally liaise with the scheme todetermine the amount of accrued GMP liability for which the scheme is responsible.

1.32 If a trade union requires this information independently, it must provide the same information as thescheme. The only information which can be provided is the overall GMP liability for the scheme as awhole, unless the written consent of the following is obtained:

• employees

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• members who have reached SPA, or

• the widows or widowers of deceased members.

Contracted-out Contribution Information Service (COCIS)

1.33 Employers and schemes can be provided with contracted-out contributions/earnings details by magnetic media submissions. Further information can be found in manual CA20 Using the Contracted-out Contributions/Earnings Information Service.

1.34 There is a charge made for this service. For further information, including details of thecharges, contact

✉ Inland Revenue National Insurance Contributions OfficeServices to Pensions IndustryRoom BP4102Benton Park ViewNewcastle upon TyneNE98 1ZZ

Annual GMP/CEP reconciliation check

Revised GMP information to pension schemes

1.35 Services to Pensions Industry

• carry out a comprehensive annual GMP reconciliation check, and

• advise COSR (and from 6 April 1997 COMB) schemes of any significant change to the GMPamount previously notified.

1.36 Although insignificant discrepancies are not notified, the correct GMP, as revalued, will be notified to the scheme at retirement, widowhood or widowerhood. Any difference in the LRP amount is disregarded.

1.37 If, at any time, information is received by Services to Pensions Industry which significantly alters thevalue of the GMP, a further revised GMP statement CA1625 is issued.

1.38 Any revised early leaver GMP statements, issued as a result of the reconciliation check, where the termination date is in the 1997/98 tax year or later, will show that

• the GMP has been calculated using contracted-out contributions/earnings up to and includingthe 1996/97 tax year only

• the earnings used in the calculation have been revalued by reference to the Section 148 order, seeparagraph 5.17, made in the tax year of termination.

1.39 From the tax year 2000/2001, this annual check will no longer be carried out. This is because termination notices received and processed after 6 April 2000 where an early leaver GMP needs to becalculated, will be based on recorded contracted-out contributions/earnings up to and including the1996/97 tax year only.

Revised CEP refund/payment request to pension schemes

1.40 Services to Pensions Industry

• carry out a comprehensive annual State Scheme Premium reconciliation check to review, and

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• recalculate State Scheme Pension amounts if a period of contracted-out employment terminatesin either of the two years before the year of processing.

1.41 After recalculation, if either an under or overpayment is identified which is not within the predetermined tolerances

• a request for further payment will be issued, or

• a refund of the overpayment will be made.

Tracing service

1.42 The Department for Work and Pensions provides a pre-paid letter forwarding service for pensionproviders who wish to trace individuals with entitlement to protected rights.

Enquiries must be in a standard format. Further information about this service can be obtained from

✉ Department for Work and PensionsLetter Forwarding ServiceCompensation Recovery UnitRoom M0201Durham HouseWashingtonTyne and WearNE38 7SF

� 08459 152 629

1.43 Inland Revenue National Insurance Contributions Office can perform bulk traces for NINOs. Enquiriesabout this service can be made by contacting

✉ Inland RevenueNational Insurance Contributions OfficeGeneral IndexRoom H3002Benton Park ViewNewcastle upon TyneNE98 1ZZ

� 08459 158 323

1.44 There is a charge made for these services.

Additional information/services

1.45 Additional information about schemes in contracted-out employment can be found in:

Manual Title

CA14A Termination of Contracted-out Employment - Manual for Money Purchase PensionSchemes and Money Purchase Parts of Mixed Benefit Schemes

CA14C Contracted-out Guidance for Salary Related Pension Schemes and Salary Related OverseasSchemes

CA14D Contracted-out Guidance for Money Purchase Pension Schemes and Money PurchaseOverseas Schemes

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CA14E Contracted-out Guidance for Mixed Benefit Pension Schemes and Mixed BenefitOverseas Schemes

CA14F Technical Guidance on Contracted-out Decision Making and Appeals

CA15 Cessation of Contracted-out Pension Schemes Manual

CA16 Appropriate Personal Pension Scheme Manual - Procedural Guidance

CA16A Appropriate Personal Pension Scheme Manual - Guidance for Scheme Managers

CA19 Using the Accrued GMP Liability Service

CA20 Using the Contracted-out Contributions/Earnings Information Service

CA21 Using the National Insurance Number/Date of Birth Checking Service

CA22 Contracted-out Data Transactions using Magnetic Media

CWG2 Employer’s Further Guide to PAYE and NICs

CA39 Contracted-out contributions for employers with Contracted-out Salary Related Schemes

CA70 Magnetic Tape Transmission of Data to Appropriate Personal Pension, Contracted-outOccupational Schemes

CA84 Stakeholder Pension Scheme Manual - Procedural Guidance

CA85 Cessation of Stakeholder Pension Schemes Manual

Background to Contracting-out

Pensions

2.1 The State Retirement Pension, bereavement benefit and Incapacity Benefit are in two parts

• a basic flat-rate pension, and

• an Additional Pension (AP) based on the employee’s earnings, or for bereavement benefit thedeceased spouse’s earnings, between the Lower and Upper Earnings Limits from 6 April 1978 foreach year of their working life.

2.2 A widower claiming Retirement Pension may be entitled to AP based on his late wife’s earningsbetween the Lower and Upper Earnings Limit from 6 April 1978 for each year of their working life.

2.3 Pension rights earned before award, and pensions in payment, are revised each year to ensure theyare protected against inflation.

2.4 The AP is also known as the State Second Pension or State Earnings Related Pension Scheme (SERPS)prior to 6 April 2002.

Contracting-out

2.5 Occupational pension schemes which satisfy certain statutory requirements can contract-out of theadditional state pension.

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• since 6 April 1978, as a Contracted-out Salary Related (COSR) scheme which offers to pay a pension related to the level of the members earnings, or

• since 6 April 1988, as a Contracted-out Money Purchase (COMP) scheme if

- the employer undertakes to make minimum payments to a pension scheme. These payments are calculated on earnings between the LEL and UEL. From April 1999 this includes any NIC rebate received based on their earnings between the LEL and the Earnings Threshold despite there being no liability for NICs

- members are provided with a pension based on the value of the amount of minimum payments made to the scheme, together with the investment return, see manual CA14A Termination of Contracted-out Employment - Manual for Money Purchase Pension Schemes and Money Purchase Parts of Mixed Benefit Schemes

• since 6 April 1997, a scheme can be contracted-out on both bases at the same time. Theseschemes are known as Contracted-out Mixed Benefit (COMB) schemes and are broadlyadministered as if they were two separate schemes. This enables some members to be in a COSRpart and others in a COMP part of the same scheme

• existing COSR schemes and newly contracted-out schemes were able to become COMB schemesfrom 6 April 1997 onwards

• for further information, see manual CA14A Termination of Contracted-out Employment - Manual forMoney Purchase Pension Schemes and Money Purchase Parts of Mixed Benefit Schemes

• an existing COMP scheme was not able to open a COSR part and become a COMB scheme until6 April 1998

• from 6 April 1997, under a second set of Regulations, a COSR scheme was able to switch toCOMP scheme status while continuing to hold accrued Guaranteed Minimum Pension (GMP) liabilities within the scheme. This provision allowed those schemes contracted-out on a COSRbasis that do not want to remain COSR schemes under the new rules to move smoothly to COMPscheme provision

• from 6 April 1997, COSR schemes and COSR parts of COMB schemes have to meet a test ofoverall scheme quality for pensionable service after 6 April 1997.

Termination procedures

2.6 The termination procedures to follow for

• the COSR part of the COMB scheme are detailed in this manual, see paragraph 11.13 et seq, and

• the COMP part of the COMB scheme are detailed in paragraph 7.11 et seq, of manual CA14ATermination of Contracted-out Employment - Manual for Money Purchase Pension Schemes and MoneyPurchase Parts of Mixed Benefit Schemes.

Changes from 6 April 2001

2.7 The Welfare Reform and Pensions Act 1999 (WRAP) legislates for employers to contract-outand operate a Contracted-out Money Purchase Stakeholder Pension (COMPSHP) scheme.From 6 April 2001

• an existing COMP scheme can convert to stakeholder status and operate as a COMPSHPscheme, or

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• an employer can elect to contract-out and operate a COMPSHP scheme.

The procedures to be followed to become a SHP scheme are detailed in the Personal Pension SchemesGuidance Notes (including Stakeholder Pension Schemes (IR76 leaflet)) available from PSO. This leafletis also available on the Internet.

The termination and transfer procedures for COMPSHP schemes can be found in manual CA84Stakeholder Pension Scheme Manual - Procedural Guidance.

National Insurance contributions

2.8 For contracted-out employees of COSR and COSR parts of a COMB pension scheme and theiremployers, NICs are payable as follows:

• For tax years up to and including 1998/1999

- on earnings below the LEL, NICs are payable at the not contracted-out rate

- on earnings between the LEL and the UEL, NICs are payable at the contracted-out rate.

• For the 1999/2000 tax year

- on earnings at or below the LEL, NICs are not payable by either the employee or employer

- on earnings between the LEL and the UEL, NICs are payable by the employee at the contracted-out rate

- on earnings between the LEL and the employers earnings threshold, NICs are not payable by the employer

- on earnings between the employer earnings threshold and the UEL, NICs are payable by the employer at the contracted-out rate.

• For the 2000/2001 tax year

- on earnings at or below the LEL, NICs are not payable by either the employee or employer

- on earnings between the LEL and the employees earnings threshold, NICs are not payable by the employee

- on earnings between the employee earnings threshold and the UEL, NICs are payable by the employee at the contracted-out rate

- on earnings between the LEL and the employers earnings threshold, NICs are not payable by the employer

- on earnings between the employer earnings threshold and the UEL, NICs are payable by the employer at the contracted-out rate.

• For the 2001/2002 and later tax years

- on earnings at or below the LEL, NICs are not payable by the employee or employer

- on earnings between the LEL and the earnings threshold, NICs are not payable by theemployee or employer

- on earnings between the earnings threshold and the UEL, NICs are payable by the employee and employer at the contracted-out rate.

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Note: Following the introduction of the employer and employee earnings threshold, no NICs are payable onearnings between the LEL and the earnings thresholds, however a contracted-out rebate is still due onearnings between the LEL and the thresholds. This is referred to as the NIC rebate.

The employee NICs due are reduced to reflect the NIC rebate that would have applied to the earningsabove the LEL, up to and including the employee threshold. If the NIC rebate cannot be fully offsetfrom the NICs payable, any excess sum is available for the employer to offset against their widerNICs liability.

The employer makes a deduction from their overall NIC payments to reflect the NIC rebate thatwould have applied to the employer contributions due on earnings above the LEL, up to andincluding the employer threshold.

2.9 For married women and widows entitled to pay contributions at the reduced rate, the contributionreduction only applies to the employer’s share.

2.10 Contributions on earnings above the UEL are

• payable at the not contracted-out rate by the employer

• not payable by the employee.

2.11 For employees who are over SPA, contributions are

• payable at the not contracted-out rate by employers

• not payable by the employee.

GMP - 6 April 1978 to 5 April 1997

2.12 COSR schemes are required, for any period of employment between 6 April 1978 and 5 April 1997 toprovide members with a GMP, which is broadly equivalent to the amount of AP the employee wouldhave received if they had not been contracted-out. The employee’s state additional pension is reducedby the amount of GMP.

2.13 The GMP is calculated by Services to Pensions Industry when

• a member reaches SPA, or

• a member leaves COSR employment before SPA, or

• a member dies leaving a qualifying widow or widower, see paragraphs 12.22 to 12.29, or

• a COSR scheme ceases to be contracted-out.

Note: The current SPA is 65 for men and 60 for women. From April 2010, the pension age forwomen will be gradually increased to bring it up to age 65 - the same as for men - by April2020. However, the age at which GMPs become payable will not change.

Contracted-out Salary Related (COSR) State Scheme Premiums

2.14 In some circumstances, GMP rights are transferable to the state scheme by payment of a

• Contributions Equivalent Premium (CEP), or

• Transfer Premium (TP).

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A TP can only be accepted if the date of election is 5 April 1997 or earlier.

2.15 A Limited Revaluation Premium (LRP), see paragraph 6.8, is payable if

• a scheme has decided to limit its responsibility for revaluing leavers’ GMP to 5% per annum, and

• the termination date is on or before 5 April 1997.

Incentive payments - 6 April 1988 to 5 April 1993

2.16 COSR occupational pension schemes, which became contracted-out for the first time between 1 January 1986 and 5 April 1993 are eligible to receive incentive payments. Payments are based oncontracted-out earnings between

• 6 April 1988 or the commencement of the scheme if later, and

• 5 April 1993.

2.17 The incentive is payable for each employee

• who was in contracted-out employment in relation to a scheme that is eligible to receive incentivepayments, and

• whose employment could not have been contracted-out with another scheme during the period1 January 1986 and 5 April 1993, and

• who was not a married woman or widow paying NICs at the reduced rate.

2.18 Contact the scheme administrator for advice if you are uncertain if a scheme, or any employees contracted-out in relation to it, qualify for the incentive payments because

• one scheme merged with another and one or both schemes qualified before merging, or

• one scheme was cancelled in favour of another and one or both schemes qualified before the cancellation, or

• there has been a takeover or merger of a business resulting in a new scheme replacing a schemewhich qualified.

2.19 Although the incentive is only payable on contracted-out earnings between 6 April 1988 and 5 April 1993, schemes had until 5 April 2001 to make any claim for incentive payments.

Repayment of incentive payments with State Scheme Pensions

2.20 Any incentive payments made to a COSR scheme must be repaid if a CEP or TP is subsequently paid,see Chapter 8.

2.21 For a TP, interest is payable on any incentive payment made more than 12 months before the date ofelection to pay it, see paragraph 8.64.

2.22 No interest is payable for a CEP.

COSR rights - from 6 April 1997 onwards

2.23 From 6 April 1997, employment contracted-out by reference to COSR schemes and COSR parts ofCOMB schemes will no longer accrue GMPs.

2.24 From that date COSR and COSR parts of COMB schemes must satisfy a statutory standard by providing benefits for members that are broadly equivalent to, or better than, the pensions that would have been provided under a reference scheme as set out in the Pensions Act 1995.

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2.25 These benefits are known as post ‘97 COSR rights. When the post ‘97 COSR rights come into payment, they must be increased by the lesser of the following amounts:

• 5%, or

• the increase in the Retail Price Index (RPI).

2.26 AP will not be paid to COSR or COMB members for any contracted-out period of employmentbetween 6 April 1997 and 5 April 2002. However, members of contracted-out occupational pensionschemes may accrue AP from 6 April 2002 under State Second Pension depending upon the level oftheir earnings.

2.27 Although COSR or COMB schemes are not required to provide a GMP for employment after 5 April 1997, they must

• safeguard GMP rights accrued up to and including this date, and

• continue to revalue them at the scheme’s chosen rate of revaluation.

2.28 COSR schemes or a COSR part of a COMB scheme may, under certain circumstances, discharge theirresponsibility to pay post ‘97 COSR rights by means of a CEP. See Chapter 8.

Widows’ or widowers’ entitlement

2.29 The circumstances where widows’ or widowers’ benefits may be payable are outlined in Chapter 12.

Introduction to termination of contracted-out employment

When is contracted-out employment treated as terminated?

3.1 Contracted-out employment is treated as terminated, if

• the employee’s contract of service has expired or terminated, or if there is no contract of service,the service itself ends

• a woman who has a right to return to work following pregnancy under Section 39 of theEmployment Protection (Consolidation) Act 1978 fails to exercise that right

• the contracting-out certificate to which the employee’s contracted-out employment relates is cancelled or surrendered

• the contracting-out certificate to which the employee’s contracted-out employment relates is varied to exclude the employment in question

• the employee remains with the same employer, but changes jobs and the new employment is notcovered by the same contracting-out certificate as the previous employment

• the employee remains in employment but ceases to be a member of the contracted-out pensionscheme to which the employment relates

• an employer dies or disposes of his business and the contracted-out employment cannot be treated as continuing under any new employer, see paragraph 3.8.

3

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When is contracted-out employment not treated as terminated?

3.2 Contracted-out employment is not treated as terminated if

• the employees contract of service or the service itself expires or terminates and within six months

- the employee returns to employment with the same employer, or his successor, and the new employment is contracted-out by reference to the same scheme as the previous employment, or

- the employee returns to employment with another employer and the new employment is contracted-out by reference to the same scheme as the previous employment, and

• the following conditions are satisfied for the period of terminated employment

- no state scheme premium or Contributions Equivalent Premium (CEP) has been paid or any that has been paid has been refunded

- the calculation of the employee’s Guaranteed Minimum Pension (GMP) arising from the employment is not subject to fixed rate revaluation

- the employee’s accrued GMP and/or post ‘97 Contracted-out Salary Related (COSR) rights relating to the employment have been retained within the scheme, and

- the scheme is one for which there is a common fund.

3.3 If contracted-out employment is treated as not having been terminated in these circumstances, theinterval between the employments does not count toward any calculation of the total period of linkedcontracted-out employment.

3.4 If the contracting-out certificate relating to the employment has been cancelled or surrendered, thecontracted-out employment is not treated as terminated if

• within six months, the employee becomes a member of another contracted-out scheme to whichhis employment relates with the same employer, and

• the following condition is satisfied for the period of terminated employment

- the employee’s accrued GMP and post ‘97 COSR rights relating to the employment are transferred to the new scheme.

3.5 If the contracting-out certificate relating to the employment has been varied to exclude theemployment in question, contracted-out employment is not treated as terminated if

• within six months

- the employee’s employment again comes within the description of employment to which thecontracting-out certificate relates, or

- the employee becomes a member of another contracted-out scheme to which his employment relates with the same employer, and

• the following condition is satisfied for the period of terminated employment:

- the employee’s accrued GMP and/or post ‘97 COSR rights relating to the employment are transferred to the scheme.

3.6 If the employee has changed jobs and the new employment is no longer covered by the samecontracting-out certificate as the previous employment, contracted-out employment is not treated asterminated if

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• within six months

- the employee’s employment again comes within the description of employment(s) to which the contracting-out certificate relates, or

- the employee becomes a member of another contracted-out scheme to which his employment relates with the same employer, and



3.7 If the employee has ceased to be a member of the scheme to which his employment relates, contracted-out employment is not treated as terminated if

• within six months the employee becomes a member of another contracted-out scheme to whichhis employment relates with the same employer, and



Circumstances where there is a change of employer, but the employee’s contracted-out employment istreated as not having terminated

3.8 If an employer dies, or otherwise ceases to be the employer in relation to an employee’s contracted-out employment, and the business is taken over by a new employer, the employee’s contracted-out employment under the old employer will not be treated as terminated. However, thefollowing conditions must be satisfied:

• the employee’s service after change of employer continues to qualify him for GMP and/or post ‘97 COSR rights under the same contracted-out scheme as that of the old employer, but alsosee paragraph 3.15, and

• the new employer accepts all of the responsibilities of the former employer for any contributionsto the scheme and any state scheme premiums (SSPs) or CEPs which are outstanding for thescheme at the time of the change, and

• the new employer notifies Services to Pensions Industry of the change within one month of ittaking place and provides Services to Pensions Industry with any information they mightreasonably require.

3.9 If an employee’s contracted-out employment is to be treated as continuing after a change in employer, the contracting-out certificate issued to the old employer will be treated as issued to thenew employer and varied by Services to Pensions Industry as necessary.

Special cases

Women with a right to return to work after pregnancy or confinement

3.10 All expectant mothers have a statutory right to return to work after a period of general maternityleave under the provisions of Section 33 of the Employment Protection (Consolidation) Act 1978(hereafter, the 1978 Act). Some women, however, have a statutory right under Section 39 of the1978 Act to extend their absence beyond the period allowed for general maternity leave, butkeep the right to return to work.

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3.11 A woman has the right to extend her absence from work if

• at the beginning of the eleventh week before the expected week of childbirth, she has been continuously employed by her employer for a period of not less than two years.

3.12 A woman wishing to exercise her right to return to work under Section 39 of the 1978 Act can

• return to work for her employer, or his successor, at any time during the period starting at theend of her general maternity leave period and ending twenty-nine weeks after the beginning ofthe week in which childbirth occurs, providing she has given her employer appropriate notice ofher intentions.

3.13 A woman’s previous period of contracted-out employment must be treated as not having been terminated, if

• her contracted-out employment has been treated as terminated because her service terminateddue to extended maternity leave, and

• she subsequently exercises her right under Section 39 of the 1978 Act to return to work.

3.14 If contracted-out employment is treated as not having been terminated in these circumstances, theinterval between the employments does not count toward any calculation of the total period of linkedcontracted-out employment.

Changes of employer where service under a new employer cannot continue toqualify the employee for GMP and/or Post ‘97 COSR Rights

3.15 If there is a change of employer in the circumstances described at paragraph 3.8, an employee’s contracted-out employment will not be treated as terminated if certain conditions are satisfied. The first condition is that

• the employee’s service after the change of employer must continue to qualify them for GMPsand/or post ‘97 COSR rights under the same contracted-out scheme as that of the old employer.

This is known as the ‘continuing qualifying service rule’.

3.16 In some cases, however, the employee’s service after the change of employer cannot count as qualifying service for GMPs and/or post ‘97 COSR rights because their service with the previousemployer (hereafter, service A) has already qualified for benefits up to the limits imposed by thescheme itself.

3.17 The contracted-out employment in service A will be treated as satisfying the continuing qualifying service rule for the purposes of paragraph 3.8 if, in these circumstances, the following conditionsare satisfied:

• the annual rate of pension benefit for which service A has qualified them is not less than half thepensionable earnings on which it is calculated, and

• the total benefits payable* are the same as, or more favourable than, any GMP and/or post ‘97COSR rights that the employee would be entitled to in respect of

- service A plus

- any linked qualifying service during which the employee was in contracted-out employment plus

- any periods of employment in service A that would be treated as contracted-out by virtue of this paragraph.

* Note: In the above paragraph the ‘total benefits payable’ are defined as benefits accrued for service,

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regardless of whether the employment was Contracted-out or not. They do not, however, include benefits accrued from Additional Voluntary contributions or Equivalent Pension Benefits (EPBs).

Employees in two or more contracted-out employments where one contractof service, or the service itself, expires or is terminated

3.18 Contracted-out employment will only be treated as terminated if

• all of the employee’s contracted-out employments are treated as terminated, because the contract, or service, has either expired or terminated

• a contract of service, or the service itself, expires or terminates and the employee to which it relates is employed concurrently in two or more employments operated by the same employer, and

• both/all employments are contracted-out by reference to the same scheme.

Employee goes abroad

3.19 Contracted-out employment within Great Britain (GB) will be treated as not having terminated if

• an employee in contracted-out employment ceases to be liable for Class 1NICs for thatemployment only because they are employed outside of GB, and

• all service in employment outside GB continues to qualify the employee for benefits under thesame scheme as their previous employment within GB.

Internal moves within a Contracted-out Mixed Benefit (COMB) scheme

3.20 If an employee’s employment is contracted-out with reference to a COMB scheme, any internal movesfrom one part to the other will not be treated as a termination of contracted-out employment.

Contribution liability when an employee’s contracted-out employment terminates

Employee leaves employment

3.21 When a scheme member leaves contracted-out employment, the NICs due on any regular paymentsmade after the last day of service are as follows:

• up to six weeks after the date of termination - contracted-out rate

• more than six weeks after the date of termination - the not contracted-out rate.

3.22 If an employee leaves employment and receives a payment after regular payment has ended (egarrears of pay from a backdated pay increase, holiday pay for a holiday not taken, a one off payment,eg a bonus), contributions are payable as follows:

• up to six weeks after the date of termination - contracted-out rate

• more than six weeks after the date of termination - the not contracted-out rate.

Use the relevant weekly contribution table current at the time of payment.

3.23 Payments made no more than six weeks after the termination date must be taken into account andany related Contracted-out earnings should be recorded separately on the termination notice sent toServices to Pensions Industry. The date of termination shown on the notice should be the employee’slast day of service,see paragraph 4.10.

3.24 If the termination notice for the employee has already been sent to Services to Pensions Industrywhen payment is made

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• do not notify the additional contracted-out earnings to Services to Pensions Industry

• do not send a supplementary termination notice.

Employee does not leave employment

3.25 If an employee stops contracting-out but remains in the same job, liability for contributions at the not contracted-out rate begins with the first payment of earnings made after the termination of contracting-out, even if they have been earned before that date.

What happens after termination?

3.26 After termination see paragraph 3.1, GMP rights and post ‘97 COSR rights can be dealt with inseveral ways. The relevant chapter of this manual and the form to notify Services to Pensions Industryare given below:

Circumstances Chapter Form

Date of leaving on or before 5 April 1997

GMP retained in the scheme and revalued by 6 CA16125% compound or in line with Section 148 orders if this turns out to be less

From 6 April 1997 limited rate revaluation is not an option. If the termination date is after 5 April 1997 this form cannot be used

GMP retained in the scheme and revalued 6 CA1615by a fixed rate

GMP retained in the scheme and fully 6 CA1616revalued in line with Section 148 orders

GMP rights to be transferred to another COSR, 9 DependentContracted-out Money Purchase (COMP) Contracted-out onMoney Purchase Stakeholder Pension (COMPSHP), COMB or circumstances Appropriate Personal Pension (APP)/Appropriate Personal Pension Stakeholder Pension (APPSHP) scheme and in some circumstances to a not contracted-out scheme

GMP rights to be bought out through an 10 CA1610insurance company (use where a termination notice has been sent previously)

GMP rights to be bought out through an 10 CA1891insurance company (use where a terminationnotice has not been sent previously)

GMP rights to be bought back into the state 8 CA1611scheme by payment of a CEP

GMP rights to be bought back into the state 8 CA1603scheme by payment of a Transfer Premium (TP)

From 6 April 1997, TPs will no longer be an option for schemes if the date of election is after 5 April 1997. When this is the case, this form cannot be used

32

Date of leaving on or after 6 April 1997

GMP rights revalued by fixed rate or 4 CA1886Section 148 orders and/or post ‘97 COSRrights to be retained in the scheme

GMP rights and/or post ‘97 COSR rights to be 9 CA1887transferred to another COSR, COMP/COMPSHP,COMB or APP/APPSHP Scheme

continued

(3.26) Circumstances Chapter Form

GMP rights and/or post ‘97 COSR rights 9 CA1890 to be transferred to an Overseas scheme

GMP rights and/or post ‘97 COSR rights 10 CA1610 to be bought out through an insurance company

GMP rights to be bought out through an 10 CA1891insurance company (use where a terminationnotice has not been sent previously)

GMP and/or post ‘97 COSR rights to be 8 CA1611bought back into the state scheme by payment of a CEP

See Appendix 1 for the full range of forms you can get from Services to Pensions Industry.

Information about notifying termination ofcontracted-out employment

Notifying Services to Pensions Industry

4.1 Notification must be sent to Services to Pensions Industry within the time limits, shown inparagraph 4.6, when an employee leaves contracted-out employment and the date of leaving isbefore the start of the tax year in which State Pension Age (SPA) is reached. If a termination isnot notified, enquiries are sent to the employer.

4.2 Notifications may be sent on magnetic tape or flexible disk if you

• have computer equipment which is Inland Revenue National Insurance Contributions Office compatible, and

• can submit a minimum of 100 transactions at regular intervals, normally monthly. If you wish tosubmit notifications more frequently, this will be considered on request.

4.3 Manual CA22 Submitting Contracted-out Data Transactions using Magnetic Media is available fromServices to Pensions Industry. Replies can be sent on paper, magnetic tape or flexible disk.

Responsibility for notification

4.4 The responsibility for notification of termination of contracted-out employment may be delegated to

4

33

one body, eg to a scheme or insurance company. However, most termination forms require entries byboth the employer and the scheme.

When is a notification of termination of contracted-out employment not required?

4.5 Notification of termination of contracted-out employment is not required if

• the employee dies. However, see paragraph 12.28

• it takes place in the tax year in which the employee reaches SPA or later

• a Contributions Equivalent Premium (CEP) for an individual would be payable but is less than £17Notification is required for all other premiums even if the amount is less than £17

• an employee’s employment is contracted-out with reference to a Contracted-out Mixed Benefit(COMB) scheme and there is an internal move from one part of the scheme to the other.

Time limit for notifications

4.6 Notifications must be submitted in the period from one month before the expected date of termination until six months after the date of termination, except if

• a CEP in respect of a widow’s or widower’s Guaranteed Minimum Pension (GMP) from a Contracted-out Salary Related (COSR) scheme, or the salary related part of a mixed benefitscheme is to be paid. If this applies, notification must be given no later than six months afterdeath, see paragraphs 8.26 and 8.27

• GMP rights and/or post ‘97 COSR rights built up in a COSR scheme are transferred or boughtout, notification must be given within five weeks of the date of the transfer or buy-out.

Extension of the time limit for notifications

What to do

4.7 A longer period may be approved if the notification could not reasonably have been given within thetime limits. An application for an extension of the time limits must be made to Services to PensionsIndustry as follows:

Step Action

1 Fill in form CA1596

2 Make sure that the form is signed and dated. The completed form must be sent toServices to Pensions Industry no later than six months after the date of termination

Guidelines for completion of notifications

4.8 Use the forms listed in Appendix 1 to notify Services to Pensions Industry. Instructions for completionare included on each form. Please also bear in mind the following guidelines:

Area Guidance

Forms Fill in forms in CAPITAL LETTERS and complete all relevant boxes

If a change to the method of preservation is made after termination has been notified,send a revised notice of termination, explaining the circumstances and boldly noted

34

‘Change of Preservation’. If the change is approved by Services to Pensions Industry,any premium will be refunded without application

Revised notices of termination must be boldly noted ‘Revised’

The legal declaration on the notice of termination must be signed

Show a contact point and full address for correspondence

Always quote the employee’s name and National Insurance number (NINO)

continued

(4.8) Area Guidance

Forms If the NINO is not known

• fill in a separate notification

• give full name, date of birth and any previous surname

If you wish to check the employee’s NINO or date of birth, see paragraph 1.18

Date The commencement date of contracted-out employment cannot be earlier than

• 6 April 1978

• the employee’s 16th birthday

• the effective date of the contracted-out certificate

If accrued rights have been transferred in from another scheme, the commencement dateis the commencement date of the earlier contracted-out employments

The termination date is the date on which contracted-out employment actually ended orno later than the end of the tax year before SPA, if earlier

ECON Make sure that the Employer’s Contracting-out Number (ECON), including the correctsuffix letter, is correctly completed

The ECON must be the same as on the End of Year Summary submitted for the employee. This will enable the GMP and/or state scheme premium to be accurately calculated

SCON Make sure that the Scheme Contracted-out Number (SCON), including the correct suffix letter, is correctly completed to identify the scheme or other paying authority to whichdetails of the GMP possible entitlement to post ‘97 COSR rights, or state scheme premium will be notified at the time of leaving or at SPA or widowhood

Earnings Employee’s contracted-out earnings are the earnings between the Lower Earnings Limit(LEL) and the Upper Earnings Limit (UEL). Only show the number of pounds, eg £1053. Do not show zeros or trailing pence

If a married woman or widow paying reduced rate contributions starts paying contributions at the full contracted-out rate in either the tax year of termination or theprevious tax year, show the total amount of contracted-out earnings i.e. those betweenthe LEL and the UEL

35

Earnings information is always required for periods of contracted-out employment:

• which terminate on or before 5 April 1997

• for which a CEP is to be paid, including any period which ends post 5 April 1997.

4.9 If the employee has been employed concurrently in two or more contracted-out employments withthe same employer, but in different pension schemes and earnings are aggregated

• strike through the appropriate earnings boxes with a bold line

• attach a note to the notice of termination explaining the situation, see paragraph 4.19.

4.10 If termination of contracted-out employment, other than if a CEP is to be paid, occurs in one tax yearbut contracted-out contributions for that employment are paid in the next tax year, and the date oftermination is on or before 5 April 1997, the contracted-out earnings on which they are based mustbe shown separately on the next line of the notice of termination. For example, if the date of leavingis 5 April 1997, the contributions will have been deducted in the 1997/98 tax year. If a CEP is to bepaid the date of termination could be later than 5 April 1997.

4.11 If in either the tax year of termination or the previous tax year

• the deferred payment arrangements have operated, enter the notional contracted-out earningsrecorded by the employer for those tax years, see paragraph 4.29

• form CA1609 has been filled in to show movement between employers using the same scheme,add together the contracted-out earnings for the first and second employments and enter thetotal amount, see paragraph 4.32

• the employee moved from one payroll to another but remained in the same scheme and continued to pay contributions under the same ECON

- add together the contracted-out earnings paid under the first and second payrolls, and

- enter the total amount

• no contributions were paid, eg because of sickness or because wages due in that tax year are paidin the preceding tax year, enter ‘0’. Do not leave the box(es) blank

• the employee transferred from one contracted-out scheme to another under a different ECON,enter the contracted-out earnings for the later employment only.

Earnings details referred to above only need to be shown for tax years up to and including the1996/97 tax year. If a CEP is to be paid, earnings should be shown for periods of contracted-outemployment terminating post 5 April 1997.

Notifying termination if employee goes abroad

4.12 An earner’s service in contracted-out employment can be treated as continuing whilst they areemployed outside Great Britain (GB).

4.13 This can happen if

• the earner ceases to be liable for Class 1 contributions because they are employed outside GBprovided

• the employment outside GB continues to qualify for benefits under the scheme because of thatemployment.

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What to do

4.14 The scheme should notify Services to Pensions Industry as follows:

Step Action

1 fill in form CA1614

2 make sure the form is signed and dated. Send the completed form toServices to Pensions Industry

4.15 If the conditions in paragraphs 4.12 and 4.13 do not apply, contracted-out employment is treated asterminated and normal notification procedures should be followed.

Notifying termination if employee is in concurrent contracted-out employments

4.16 If an employee is in more than one contracted-out employment concurrently, the action to notify thetermination of one of the employments, where appropriate, see paragraph 3.1, and the informationrequired by Services to Pensions Industry to assess any pre ‘97 GMP and/or premium liability amountdepends on the circumstances.

4.17 The CWG2 Employer’s Further Guide to PAYE and NICs, gives detailed guidance on the assessment of contracted-out earnings for concurrent employment. These procedures do not applyif the employee is a married woman or widow paying reduced rate contributions.

Same employer, same scheme

4.18 If termination has not occurred, see paragraph 3.18, earnings should be aggregated. If it is not possible to aggregate earnings, see paragraph 4.26.

Same employer, different schemes

4.19 If possible, aggregate earnings and keep separate records showing the contracted-out earnings foreach employment.

4.20 When employment ends, Services to Pensions Industry ask for annual details of such contracted-outearnings. Records must be kept for three years after the employments end.

4.21 If one of the employments ends, attach a note to the notice of termination explaining that earningshave been aggregated under the same ECON and that more than one scheme is involved. If this isnot done, GMP or premium liability may be assessed on the aggregated amount.

4.22 If it is not possible to aggregate earnings, see paragraph 4.26.

Different employers, same scheme

4.23 If both employments use the same ECON, a notice of termination is not required, see paragraph 3.18,until employment under the scheme ends. If the employments use different ECONs, a notice of termination must be sent if one of the employments ends, but see paragraph 4.32.

Different employers, different schemes

4.24 The employments are treated separately and the employee’s contracted-out earnings in eachemployment are recorded under their respective ECONs unless deferred contributions paymentsarrangements apply, see paragraph 4.26.

4.25 If employment terminates, the normal notification rules apply and GMPs or premiums areassessed normally.

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Deferred payment of contributions

4.26 An employee may apply for contribution liability in some employment(s) to be deferred if they

• are concurrently employed in two or more contracted-out employments whose earnings are notaggregated, and

• expect to pay contributions on earnings at or above the UEL.

4.27 Form CA2700, an authority not to deduct employee’s contributions, is sent to the employer on application to

✉ Inland RevenueNational Insurance Contributions OfficeDeferment ServicesBenton Park ViewNewcastle upon TyneNE98 1ZZ

4.28 Employers who have been sent form CA2700

• must keep records of the employee’s contracted-out contributions that would have been payable, and

• are requested to keep a record of the:

- total employee’s contributions which would have been due

- earnings on which the employee’s total contributions would have been payable

- earnings on which employee’s contributions at the contracted-out rate would havebeen payable.

4.29 Employers will be asked by Deferment Services to provide details of notional amounts after the end ofeach tax year. Records must be kept for at least three years after employment ends.

4.30 Any GMP liability or premium due when the employment terminates is assessed on the notional contracted-out earnings.

4.31 If contributions are paid separately in concurrent employments they may exceed the annual maximum. The employee is refunded any contributions paid in excess of the maximum, but theInland Revenue National Insurance Contributions Office keep a record of the total contracted-outearnings paid in each employment. The GMP and premiums are calculated using the contracted-outearnings paid before refund.

Change of ECON

What to do

4.32 If an ECON is no longer being used, the termination must be notified, see paragraph 3.1, unless an

• employer with their own ECON joins a group of employers with a common ECON contributing tothe same scheme and Services to Pensions Industry arrange for them to take the common ECON.The employments recorded under the original ECON are linked to the common ECON, seeparagraphs 3.4 to 3.5

• employee moves from an employer with one ECON to another with a different ECON butremains a member of the same contracted-out scheme and the new ECON is known within thetime limits for notification, see paragraphs 3.4 to 3.5. In this situation, the scheme should take thefollowing actions:

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Step Action


2 sign and date the form. Send the completed form to Services to Pensions Industry. It can be sent within one month before the expected date of the move, but no later thansix months after that date

4.33 Notify Services to Pensions Industry on a formal notice of termination, if

• an employee moves from an employer with one ECON but remains a member of the same contracted-out scheme, and

• the scheme cannot establish within the time limits for notification that the employee has movedto another employer within the group.

What to do

4.34 Step Action

1 fill in complete a notice of termination

2 sign and date the form. Send the completed form to Services to Pensions Industry nolater than six months after the move

4.35 If it is later established that the previous contracted-out employment is to be treated as not terminated, see paragraph 3.2, notify Services to Pensions Industry on form CA1609, see paragraph4.32. They will amend their records and cancel the notice of termination.

4.36 If an employee moves from one employer to another within a group of employers and does notremain a member of the same scheme, a formal notice of termination is always required to secureany GMP and/or post ‘97 COSR rights. However, see paragraph 4.5 et seq.

4.37 Consult Services to Pensions Industry in any case of doubt or difficulty.

Holding companies

4.38 An employer covered by a holding company contracting-out certificate may also have theirown certificate. An employer who also uses their own ECON must accept responsibility fornotifying terminations.

4.39 If the holding company scheme notifies terminations for all members of the scheme, they must usethe ECON under which the National Insurance contributions (NICs) have been paid.

Maternity leave

4.40 A woman has the right to return to work following pregnancy, under the provisions of theEmployment Protection (Consolidation) Act 1978.

4.41 If she exercises that right and returns to contracted-out employment with her original employer orsuccessor, contracted-out employment is not treated as having terminated, see paragraphs 3.10 to 3.14.

4.42 If she decides not to exercise the right and resigns before the commencement of maternity leave, thetermination or non-termination of contracted-out employment, plus any subsequent action if shedecides to return to work, will be determined by reference to the conditions outlined in paragraphs3.1 and 3.2.

39

4.43 If she does not return to work, contracted-out employment is treated as having terminated on thedate the contract of service ended (determined by her employer) following the period of maternityleave, see paragraph 3.1.

4.44 The time limit for notification of termination begins on the date employment ceases.

4.45 If an employee returns to work, after having said that she did not intend to do so

• any notice of termination must be cancelled

• the employer must notify Services to Pensions Industry who will refund any CEP orLimited Revaluation Premium (LRP).

4.46 Whether she intends to return to work or not, NICs are payable for any payment, including StatutoryMaternity Pay (SMP), made during the period of maternity leave.

4.47 If contracted-out employment is not treated as terminated, contributions continue to be payable atthe contracted-out rate.

4.48 If contracted-out employment is treated as terminated and payment is made

• no more than six weeks after the termination date, contributions are payable at the contracted-out rate

• more than six weeks after the termination date, contributions are payable at the not contracted-out rate.

4.49 If the date of termination of contracted-out employment is on or before 5 April 1997, the contracted-out earnings paid during the period of maternity leave must be included on any notice oftermination.

4.50 SMP is explained in manual CA29 Employer’s Manual on Statutory Maternity Pay.

Change in method of preservation

4.51 If the method of preservation is to be changed after notifying the termination, a note must beattached to the new notice of termination explaining the circumstances.

4.52 The notice must be noted ‘Change of Preservation’. Any premium is refunded, without application, ifthe change is approved by Services to Pensions Industry.

Change of Responsible Paying Authority (RPA) for GMP and Post ‘97 COSR Rights

4.53 If, following notification to Services to Pensions Industry that GMPs have been retained, there is anychange in the responsibility for the GMP, Services to Pensions Industry must be notified, seeparagraph 9.33 et seq.

4.54 If a group of employees is involved, Services to Pensions Industry must be consulted before thechange because the information required depends on the extent of the change.

Married women and widows paying reduced-rate contributions

4.55 Notices of termination are not required for married women and widows who have paid reduced rate NICs.

4.56 Take action as in paragraph 4.57 if a married woman or widow with reduced liability

• changes her status and starts paying NICs at the contracted-out rate, and

40

• later leaves contracted-out employment in circumstances which require a notice of termination.

4.57 Any notice submitted under the circumstances shown above should show the period of Contracted-out employment as starting

• on the date on which she first entered the contracted-out employment, and

• not the date on which she started to pay contributions at the contracted-out (category D) rate.

4.58 GMP and/or post ‘97 COSR rights and state scheme premium (SSP) liability only accrues from thedate category D rate NICs started.

4.59 Any incentive for the period 1 January 1986 to 5 April 1993 is not payable for a married woman orwidow paying reduced rate contributions, see paragraph 2.22.

Calculating Guaranteed Minimum Pension (GMP)

General

5.1 A GMP is based on any

• contracted-out National Insurance contributions (NICs) paid, up to and including 5 April 1987(1986/87 tax year)

• contracted-out earnings from 6 April 1987, up to and including 5 April 1997.

5.2 Working life for this purpose is the period

• beginning with 6 April 1978 or, if later, the 6 April, on or immediately before the employee’s16th birthday, and

• ending with the 5 April before the date of State Pension Age (SPA). (Where the calculation is for awoman and the date of retirement is after 2010, the GMP will be calculated up to 5 April beforeage 60.)

5.3 To calculate the weekly GMP use the following formula:

Formula

1 multiply together:

• the earnings factor, and

• the appropriate revaluation factor, see Appendix 3, Table 1.

2 add together all the revalued earnings factors to obtain the revalued earnings factors for each tax year

3 divide by the composite divisor appropriate to the employee’s working life, see Appendix 3, Tables 2 and 3

4 divide by 1000

See Appendix 4, Example 1

5.4 The resulting amount must be rounded to the nearest 1p, 0.5p, or more being rounded up to thenext whole penny.

5

41

5.5 If a GMP spans 6 April 1988, the calculation must be split to take account of the different rate ofaccrual before and after 6 April 1988. The resulting amounts are rounded separately, and thenadded together.

Earnings factors

5.6 The GMP is calculated from contracted-out earnings factors, not actual earnings.

Tax years up to and including 1986/87

5.7 For tax years up to and including 1986/87, the earnings factors are obtained from the employee’scontracted-out NICs paid on earnings between the Lower and Upper Earnings Limits.

5.8 The contracted-out part of contributions paid before 6 April 1985 are rounded up to the next multipleof 10p, unless it is already a multiple of 10p. Any contributions paid in the 1985/86 and 1986/87 taxyears are not rounded.

5.9 The earnings factor is calculated by dividing the contribution by the contracted-out percentage forthat year. Since 6 October 1985, NICs are payable at differing percentage rates, depending on earnings. For the 1985/86 and 1986/87 tax years, earnings factors are calculated as if contributionshad all been paid at the maximum rate.

5.10 The result is rounded to the nearest penny, with 0.5p rounded up. The total earnings factor for eachyear is rounded to the nearest pound, with 50p rounded up.

Tax years from 1987/88

5.11 From the 1987/88 tax year, the earnings factors are obtained from the earnings on which employee’scontracted-out NICs have been paid between the Lower and Upper Earnings Limits.

5.12 Column 1d of the contracted-out contribution tables shows the contracted-out earnings figure relatedto the employee’s gross earnings. The figure is in whole pounds and must be recorded on the P11(87) working sheet and on the P14 End of Year Summary.

5.13 The earnings factor is the total of column 1d of form P11 (87) or column 1d of the P14 End of Year Summary.

5.14 If you use the exact percentage method to work out contributions, the methods of working out andrecording earnings figures are slightly different.

5.15 The exact amounts, which may include pence, of gross earnings on which employee’s contributionsare payable and related contracted-out earnings, must be recorded. At the end of the year, rounddown the totals to the nearest whole pound. The earnings factor is the total rounded contracted-outearnings figure.

5.16 An earnings factor is held on the Inland Revenue National Insurance Office computer, in pence, for each tax year in which NICs at the contracted-out rate have been paid by an employee. The GMP calculation uses these earnings factors.

5.17 Earnings factors for previous tax years are revalued in line with movements in earnings generally. The rate of revaluation is set out in an order made under Section 148 of the Social SecurityAdministration Act 1992. The percentages set out in the order are converted to revaluation factors for calculation purposes, see Appendix 3, Table 1.

42

Revaluation of earnings factors

5.18 Revalued earnings factors must be calculated using the revaluation factors in Appendix 3, Table 1.

5.19 For early leavers, use the order made in the tax year in which contracted-out employment terminatesto revalue the contracted-out earnings factors for all tax years before the tax year of leaving. The earnings factor for the tax year of leaving is taken at face value.

5.20 For periods of contracted-out employment that terminate after 5 April 1997, the only contracted-outearnings that will be used to calculate the GMP are those up to and including the 1996/97 tax year.

5.21 Any contracted-out earnings for the 1997/98 or later tax years should be ignored.

5.22 If the member is still in service at the time of retirement or death

• use the order made in the tax year before the tax year in which death occurred, or SPA was reached

• apply revaluation to the contracted-out earnings factors for all tax years before the tax year inwhich the order was made

• take the earnings factor for the tax year in which the order was made at face value

• do not take into account the earnings factor for the tax year of death or the tax year in which SPAis reached

• any contracted-out earnings for the 1997/98 or later tax years should be ignored.

5.23 The earnings factors must be multiplied by the appropriate revaluation factors, then added togetherto give the revalued earnings factor.

Revaluing Guaranteed Minimum Pension (GMP)

Background

6.1 The GMP of early leavers must be revalued, up to State Pension Age (SPA) or death, if earlier.

6.2 For members who terminate contracted-out employment on or before 5 April 1997, schemes areallowed to revalue the GMP using

• Section 148 orders

• a fixed rate, or

• a limited rate (5% per annum).

6.3 For members who terminate contracted-out employment on or after 6 April 1997, schemes mayonly revalue using

• Section 148 orders, or

• fixed rate.

6

43

6.4 Schemes which used limited rate revaluation before 6 April 1997, must change to either

• Section 148 orders, or

• fixed rate from then onwards.

Limited rate revaluation can remain for those members who left the scheme before 6 April 1997.

Method of revaluation

Using Section 148 orders

6.5 The earnings factors used in the GMP calculation will continue to be revalued by laterSection 148 orders, up to and including the order for the last complete tax year before SPAor earlier death, unless

• the employee leaves contracted-out employment before SPA or death, and

• the scheme revalues early leaver’s GMP at

- limited rate, see paragraphs 6.8 to 6.27, or

- fixed rate, see paragraphs 6.28 to 6.33.


6.6 To notify terminations, use form

• CA1616, if the date of leaving contracted-out employment is on or before 5 April 1997, or

• CA1886, if the date of leaving is on or after 6 April 1997.

6.7 A GMP statement showing the amount to be revalued is sent to the scheme. The amount quoteddoes not take account of any pension rights shared on divorce.

Using limited rate (only available if the period of contracted-out employment endson or before 5 April 1997)

6.8 If an employee’s Contracted-out Salary Related (COSR) employment ends before the start of the tax year in which SPA is reached, the GMP rights may be retained in the COSR scheme with therequirement to revalue being limited.

6.9 At SPA, or death if earlier, Inland Revenue National Insurance Contributions Office compare revaluation of the GMP amount by Section 148 orders with that of the GMP at 5% compound foreach relevant tax year between the two events. The smaller of the two amounts is notified to thescheme. If the scheme authorities use limited revaluation, a Limited Revaluation Premium (LRP) ispayable to Services to Pensions Industry, see paragraphs 6.21 and 6.27.

6.10 If a woman has paid reduced-rate contributions for part of the period of contracted-out employment,the LRP is based on the contributions paid at the full contracted-out rate only.

44

Calculating the LRP

6.11 The LRP

• is based on the cost to the state of providing for revaluation in excess of 5% per annum

• varies according to

- the age and sex of the employee, and

- the current yields on investments to give schemes protection against short term variations in market prices.

6.12 To calculate the LRP:

Formula 1

For GMPs or parts of GMPs built up before 6 April 1988, take the following actions:


• weekly amount of GMP• 52

2 divide by 100

3 multiply by the Market Level Indicator (MLI)

4 multiply by the amount from the appropriate Appendix 3 Table


Formula 2

For GMPs or parts of GMPs built up after 5 April 1988, take the following actions:

1 multiply together

• weekly amount of GMP• 52

2 divide by the average MLI

3 multiply by the MLI

4 multiply by the amount from the appropriate Appendix 3 Table


Calculating the MLI

6.13 The MLI

• ensures the premium reflects the current yield on investments, and

• gives schemes protection against short-term fluctuations in stock market prices.

45

6.14 The MLI used is the average of the indicators for the first five days on which theLondon Stock Exchange was open in the month in which the event giving rise to the liabilityfor the premium occurred.

6.15 From April 1993, the average MLI is the average of the MLIs in all the months in the five years beforethe month in which the event giving rise to the liability for the premium occurred.

6.16 Until March 1993, the average MLI was the average of all the MLIs from April 1988 to the monthbefore the event giving rise to the liability for the premium occurred. For April 1988 and May 1988,the average MLI was the MLI for April 1988.

6.17 The MLI and latest average MLI can be obtained from Services to Pensions Industry on the sixthworking day of each month by phoning

� 08459 150 243

6.18 If you have any queries about the calculation of MLIs, phone

� 08459 150 150


6.19 Use form CA1612 to notify the termination. If contracted-out employment ends in the last completetax year before SPA or death, no LRP is due.

6.20 A GMP statement showing the amount to be revalued is then sent to the scheme. The amountquoted does not take account of any pension rights shared on divorce.

Responsibility for paying an LRP

6.21 Services to Pensions Industry calculate the LRP due and send a bill for payment, CA1620.

6.22 Responsibility for payment lies with the scheme.

6.23 An LRP for an individual of £17 or less is not required to be paid, but form CA1612 must be sent in all cases.

Time limits for paying LRPs

6.24 LRPs must be paid by the later of either

• six months after termination, or

• one month after Services to Pensions Industry notify the amount due.

Note: LRPs can only be paid for periods of contracted-out employment which end on or before 5 April 1997.

6.25 The time limits for making payment may be extended in exceptional circumstances, if payment cannot reasonably be made within the normal time limit. An application for an extension of the timelimits must be made as outlined in paragraph 4.6.

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6.26 The Commissioners of Inland Revenue can extend the time limits by

• up to six months, if satisfied that payment could not reasonably be made within the original period, or

• more than six months, if satisfied that earlier payment would be prejudicial to the interests of theearner or the scheme members.

6.27 If payment is not made within the time limit, liability for payment of the GMP rights remains with thescheme. Services to Pensions Industry will

• assess the GMP liability based on the contracted-out contributions/earnings notified by the employer

• revalue the earnings factors for GMP liability using Section 148 orders

• issue a statement of GMP liability. The amount quoted does not take account of any pensionrights shared on divorce.

Using a fixed rate

6.28 The alternative to Section 148 or limited revaluation is for a scheme to revalue a leaver’s GMP rightsby a fixed rate for each relevant tax year after the tax year of termination of COSR employment, up toand including the tax year before SPA or death, if earlier.

6.29 The amount of the fixed rate is:

Compound for terminations occurring Percentage

after 6 April 2002 4.5%

between 6 April 1997 and 5 April 2002 6.25%

between 6 April 1993 and 5 April 1997 7%

between 6 April 1988 and 5 April 1993 7.5%

before 6 April 1988 8.5%

6.30 There is no premium payable.

6.31 If a scheme uses this method of revaluation, it must be applied to all early leavers whose GMP rightsare retained in the scheme.

6.32 A relevant tax year is any tax year after the tax year of termination of COSR employment. Ifrevaluation of a GMP is required before SPA, eg. a transfer value has been requested or because ofpension sharing on divorce, the GMP should be revalued:

• from the tax year following that in which contracted-out employment terminated to

• the tax year in which the event takes place

For example, a member leaves contracted-out employment on 25 March 1999 (the 98/99 tax year)and requests a GMP value on 1st May 2002 (2002/2003 tax year). The GMP amount calculated atdate of leaving should be revalued for 4 years using a compound revaluation rate of 6.25%.

47


6.33 To notify the termination, use form

• CA1615, if the date of leaving contracted-out employment is on or before 5 April 1997, or

• CA1886, if the date of leaving is on or after 6 April 1997.

6.34 A GMP statement showing the amount to be revalued is sent to the scheme. The amount quoteddoes not take account of any pension rights shared on divorce.

Guaranteed Minimum Pension (GMP) anti-franking legislation requirements

GMP anti-franking legislation requirements

7.1 GMP revaluation cannot be offset against benefits in excess of the GMP or against required revaluation increases in those benefits in the circumstances described in this Chapter.

Those protected by the legislation

7.2 The following members, and their widows or certain widowers, are protected by the legislation:

• who leave contracted-out employment before scheme pension age for whom a GMP is preserved, or

• with a scheme pension age before State Pension Age (SPA), or

• who defer retirement until after SPA.

Circumstances in which a member’s benefit is protected

7.3 A member’s benefit is protected if

• the GMP is increased during an interval between:

- the termination of contracted-out employment, and

- the date on which payment of the GMP commences, and

• on the day after termination, scheme benefits have built up which exceed the GMP at that time, and

• contracted-out employment ended after 31 December 1984.

Pension provision for a scheme member

7.4 Contracted-out schemes must provide a pension at or after SPA which is more than the sum total of

• the weekly rate of

- pension, if the member reaches normal scheme pension age on or before termination of contracted-out employment, or

7

48

- pension earned up to the date contracted-out employment terminated, if before normal scheme pension age but employment continues, or

- short service benefit, if employment ends, see paragraph 7.8

• the amount by which the GMP has been increased from the date of termination of contracted-outemployment to when the GMP becomes payable

• any further pension benefits which may have been built up under the schemes after contracted-out employment ends

• any increases in the benefits in excess of the GMP due to their payment being deferred, and

• any increase during the period up to the normal scheme pension age to that part of short servicebenefit in the excess of the GMP.

Note: From 2010 when equalisation of SPA is introduced, contracted-out schemes will continue toprovide a GMP at age 60 for women. This manual will be fully amended to cover this position whenphasing in of equalisation of SPA is introduced in 2010.

Note: Occupational pension schemes must provide equal treatment for men and women in the overall pension paid to members for pensionable service from 17 May 1990.

Circumstances in which a widow’s or widower’s benefit is protected

7.5 A widow’s or widower’s benefit is protected if

• the GMP is increased during an interval between

- the termination of contracted-out employment, and

- the date on which payment of the GMP commences, and

• the pension to which the widow or widower would have been entitled, had the member died onthe date of termination, exceeds half the member’s GMP, and

• the member’s contracted-out employment ends after 31 December 1984.

Pension provision for widows or widowers

7.6 The pension contracted-out scheme must provide for a widow or widower is more than thesum total of

• the pension to which the widow or the widower would have been entitled under the scheme on the day after the member’s contracted-out employment ended, had the member died on that date

• the amount by which the guaranteed minimum payable to the widow or widower exceeds onehalf of the member’s GMP when contracted-out employment ended

• any further widow’s or widower’s pension which may have built up due to the member’s employment after the termination of contracted-out employment, and

• any increase in the widow’s or widower’s pension in excess of the GMP due to the postponementof the member’s Retirement Pension.

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Exemptions from the legislation

7.7 The legislation does not apply if

• at SPA, no increase is required to alternatives to short service benefit provided in accordance withthe Pension Schemes Act 1993 (PSA 1993). The value of any alternative provided either before orafter SPA must reflect any increase under the anti-franking and revaluation legislation

• an immediate pension equal to or larger than short service benefit is paid with the member’s consent before normal scheme pension age, eg because of ill health or redundancy. Any widow’sor widower’s benefit under these arrangements is also exempt

• a scheme member has opted for and been granted an alternative to short service benefit. Any following widow’s or widower’s benefit is also exempt

• an occupational pension payable earlier than SPA is adjusted to take into account State RetirementPension when State Retirement Pension comes into payment. The protection will apply only tothe rate of pension payable after such an adjustment is made

• the annual rate of the earner’s pension to be paid is the greater of that related to salary andanother method of calculation not directly related to salary. If the alternative method gives thehigher amount, then the protection applies only to the sum related to salary

• any higher rate of widow’s benefit paid during early widowhood, can be ignored when applyingthe above provisions, if the increase ends no later than six months after the member’s death orten years after the commencement of the member’s pension, if this is later

• the qualifying conditions for preservation are not satisfied and the member opts for an alternativebenefit other than a money purchase benefit

• a transfer was decided on or before 1 January 1985, even if it was not carried out by that date.The transferred benefits are excluded

• a transfer was agreed after 31 December 1984. The amount of any GMP included in a previoustransfer which related to the period before 1 January 1985 can be ignored.

Short service benefit

7.8 Short service benefit is the minimum benefit to which an early leaver, who satisfies the preservationrequirements in accordance with Section 71 of the PSA 1993 is entitled or to which he would be entitled if there were no minimum period of service.

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Buying back Guaranteed Minimum Pension (GMP) rights and/or Post ‘97 Contracted-out Salary Related (COSR) rightsinto the state scheme

8.1 GMP and/or post ‘97 COSR rights can be bought back into the state scheme by payment of

• a Contributions Equivalent Premium (CEP)

• a Transfer Premium (TP), where the date of election is on or before 5 April 1997.

What is a CEP?

8.2 A CEP represents the difference in National Insurance contributions (NICs) which would have beenpayable if the employment had not been contracted-out. From 6 April 2000 the CEP will continue tobe calculated on earnings between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL).The introduction of the Employee and Employer Earnings Thresholds will not impact on the way inwhich the CEP is calculated.

8.3 Payment of a CEP restores State Additional Pension entitlement. It extinguishes the contracting-outliability in the COSR scheme or COSR part of a Contracted-out Mixed Benefit (COMB) scheme.

Conditions for payment of a CEP

8.4 A CEP may be paid following the termination of contracted-out employment in thefollowing circumstances

• the contracted-out employment was by reference to a COSR scheme or included service in theCOSR part of a COMB scheme

• the total period of contracted-out employment within the COMB scheme and, if applicable, anyprevious related COSR scheme, must be less than two years

• the period of employment ended before the earner reached the scheme’s normal pension age, orif earlier, the end of the tax year before State Pension Age (SPA)

• total qualifying service as defined by the Pension Schemes Act (PSA) 1993, is less than two years

• there are no accrued rights to short service benefit - except in the case of a widow or widower,see paragraphs 8.26 to 8.28

• an election is made by completing the appropriate termination notice, see paragraph 8.18

• and one of the following applies:

- the earner ceases to be in contracted-out employment, and this is not due to the earner’s death, unless the earner leaves a widow or widower, see paragraph 8.26 to 8.28, or

- the scheme has ceased to contract-out on 6 April 1997 or later, but see manual CA15 Cessation of Contracted-Out Pension Scheme, for further information, or

- the scheme is wound up on 6 April 1997 or later.

8

51

8.5 A CEP is not payable if

• pension rights are transferred to another contracted-out scheme or to an Appropriate PersonalPension (APP)/Appropriate Personal Pension Stakeholder Pension (APPSHP) scheme, or

• an employee exercises an option allowed under scheme rules to have pension rights preservedeven though the qualifying conditions of the PSA 1993 are not satisfied, or

• an employee elects to have the pension rights secured through an insurance policy or annuitycontract, or

• accrued rights include rights transferred in from an APP/APPSHP scheme, or

• a woman dies whilst in contracted-out employment, and the period of contracted-outemployment is entirely before 5 April 1997, or

• a woman has paid reduced-rate contributions for the whole period of contracted-out employment, or

• the scheme has ceased to contract-out or is wound up before 6 April 1997, but see manualCA15 Cessation of Contracted-Out Pension Schemes Manual.

Note: If a married woman paid E rate contributions for part of a period of contracted-out employment, and D rate contributions for the remainder of the period, only the full rate contributionsshould be included in the CEP calculation.

Time limits for payment of CEPs

8.6 CEPs must be paid by the later of

• six months after termination, or


Extension of time limits

8.7 The time limits for making payment may be extended in exceptional circumstances if payment cannotreasonably be made within the normal time limit. An application for an extension of the time limitsmust be made as outlined in paragraph 4.7.

8.8 Commissioners of Inland Revenue can extend the time limits by

• up to six months, if satisfied that payment could not reasonably be made within the original period, or


CEP covers entirely pre 6 April 1997 or pre and post 6 April 1997 service

8.9 If payment is not made within the time limit, liability for payment of the GMP and post ‘97 COSRrights remains with the scheme. Services to Pensions Industry will

• assess the GMP liability based on the contracted-out contributions/earnings notified bythe employer

• revalue the earnings factors for GMP liability using Section 148 orders, unless it is known that thescheme revalues at a fixed rate

• issue a statement of GMP liability.

52

CEP covers post ‘97 service only

8.10 If payment is not made within the time limit, liability for payment of the post ‘97 COSR rights remainswith the scheme.

8.11 Any premium received after the time limit for payment has expired will be refunded.

Calculation of a CEP

8.12 When a CEP is to be paid

• any incentive payments which have been made to the scheme on behalf of the employee during the period 1 January 1986 to 5 April 1993, will be recovered and included in the total payment due

• if a transfer has taken place from a Contracted-out Money Purchase (COMP)/Contracted-outMoney Purchase Stakeholder Pension (COMPSHP) scheme or the COMP part of a COMB scheme to a COSR scheme, any Age-Related Rebates (ARRs) which have been paid to theCOMP/COMPSHP scheme or the COMP part of a COMB scheme, since 6 April 1997, will berecovered and included in the total payment due.

8.13 To calculate the CEP:

Formula

For each tax year, take the following actions:

1 multiply together the:

• total contracted-out earnings, and

• total employee’s and employer’s contribution reduction Please refer to paragraph 8.2

2 divide by 100

3 round the calculation up or down to the nearest 1p, taking 0.5 pence or higher as the next whole penny above

4 add together the amounts for each tax year

5 include any incentive payments in the total amount due


8.14 For periods of employment up to and including the 1986/87 tax year, the CEP would have been calculated on a different basis. For further information contact Services to Pensions Industry at theaddress shown at paragraph 8.22.

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Calculation of a CEP where there has been a transfer from a COMP/COMPSHPscheme or a COMP part of a COMB scheme

8.15 From 6 April 1997, the flat rate contracted-out rebate will be different for COSR andCOMP/COMPSHP employments. The CEP for the post ‘97 COMP period must be calculatedseparately, if there has been a transfer of rights from a COMP/COMPSHP, or COMP part of a COMBscheme for a period after 6 April 1997, for which a CEP is payable.

8.16 If the period of service in the COMP scheme terminated

• on or before 5 April 1997, calculate the CEP as described at paragraph 8.13

• on or after 6 April 1997, calculate the CEP as described at paragraph 8.17.

8.17 To calculate the CEP:

Formula

For each tax year relating to the COMP/COMPSHP service, take the following actions:


• total contracted-out earnings, and

• total employee’s and employer’s contribution reduction relevant to the COMP servicePlease refer to paragraph 8.2

2 divide by 100

3 round the calculation for each year up or down to the nearest 1p, taking 0.5 pence or higher to the next whole penny above

4 add together amounts for each tax year to find the total CEP due

5 for each tax year relating to the COSR service, follow steps 1 to 4, but substitute the employee’s and employer’s contribution reduction relevant to the COSR service then

6 add together the CEP due for the COMP/COMPSHP and COSR service to obtain the totalCEP due

7 include any previously paid ARRs to the COMP/COMPSHP scheme in the total amount due

See Appendix 4, Example 4A

54


What to do

8.18 If a CEP is to be paid, notify Services to Pensions Industry

Step Action


2 sign and date the form. Send the completed form to Services to Pensions Industry. It can be sent one month before the expected date of termination and up to six monthsafter the date of termination. However, if the CEP is for a widow or widower, notice mustbe given within six months after death

8.19 If a woman has paid reduced rate contributions for part of the period of contracted-outemployment, form CA1611 should be completed to show:

• the full period of contracted-out employment

• only those earnings between the LEL and UEL, please refer to paragraph 8.2.

8.20 The amount of the premium due can be calculated and sent with form CA1611 but if in doubt, awaitform CA1620 (RD611), see paragraph 8.21.

Note: A CEP of £17 or less for each individual employee is not required to be notified or paid.

Calculation of payment by Services to Pensions Industry

8.21 If you submit a notice of termination, form CA1611, but do not calculate and pay a premium,Services to Pensions Industry will make the calculation and send a bill, form CA1620 for payment.This form will show the

• amount of CEP payable

• amount of incentive payments recoverable, if applicable

• the amount of any ARR transferred in from a COMP/COMPSHP scheme or the COMP part of aCOMB scheme requiring repayment

• certified amount, see paragraph 8.36, and

• total amount payable.

How to pay a CEP

Remittance for an individual employee

8.22 Make the remittance payable to Inland Revenue National Insurance Contributions Office. Attach it tothe tear-off portion of form CA1620 and send it to


55

Remittance is for more than one employee

8.23 If a remittance

• is sent with form CA1611, the individual premium amounts must be entered in box 11 of the form

• relates to more than one employee, and is not accompanied by the relevant CA1620s orCA1611s, send a list to the address shown at paragraph 8.22, quoting each employee’s:

- National Insurance number (NINO)

- surname

- initials, and

- premium amount.

Underpayment of a CEP

8.24 If the earnings information notified for an employee on form CA1611 is later found to be incorrect,notify COEG only if the underpayment is more than £17.

Failure to pay a CEP

8.25 If a CEP of more than £17 is not paid for an employee, the scheme remains responsible for

• any GMP rights which must be revalued in line with Section 148 orders or by fixed rate revaluation

• any post ‘97 COSR rights which must be revalued in line with Retail Price Indexation (RPI) or 5%whichever is the lesser.

Widow’s CEP

8.26 If a man dies in COSR employment before he has completed two years’ qualifying service, a CEP maybe paid to transfer the widow’s GMP and/or post ‘97 COSR rights to the state scheme.

Widower’s CEP

8.27 If a woman dies in COSR employment before she has completed two years’ service, and her date ofdeath was

• on or before 5 April 1997, a CEP is not payable

• on on or after 6 April 1997, a CEP may be paid to transfer the widower’s GMP and/or post ‘97COSR rights to the state scheme.

8.28 To avoid delay in the award of state benefit in widow’s and widower’s CEP cases

• the termination notices should be sent as soon as possible, and

• the CEP should be paid within two months of the death of a member.

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CEP covers earlier employment

8.29 The amount which can be recovered extends to the employee’s share of the CEP for the earlieremployment, if

• a CEP covers GMP and/or post ‘97 COSR rights or protected rights for an earlier contracted-outemployment, and

• part of a refund due to the employee refers to the earlier employment.

But see paragraph 8.43.

8.30 Any Limited Revaluation Premium (LRP) paid for contracted-out employment on 5 April 1997 orearlier as a result of an earlier transfer is offset against the CEP. However, the certified amount iscalculated using the total CEP.

8.31 Any incentive payments made to a former scheme for an earlier employment cannot be recoveredfrom the scheme liable to pay the CEP.

Refund of a CEP

8.32 A CEP may be refunded if

• it was paid in error

• the COSR employment is not treated as terminated, see paragraph 3.2

• the employee’s pension rights are transferred to another contracted-out scheme or to an APP/APPSHP scheme

• the employee dies within

- six months of the date employment terminated, or

- one month after the date on which notification of the amount of the premium due is sent to the trustees whichever is the later

• the scheme is one under which

- a member can qualify for benefit by virtue of service either in employed earners’ employment, or as a self-employed earner, or both, and

- the earner has been a member of the scheme as a self-employed earner, which when added to their service in employed earners’ employment is less than two years.

8.33 Written application for a refund must be made to Services to Pensions Industry as soon as any of theabove circumstances apply.

8.34 If applicable, a refund will also include any previously recovered

• incentive payments

• ARRs.

8.35 When a CEP is refunded, it restores any previously extinguished

• GMP rights

• post ‘97 COSR rights.

57

Recovery of part of CEP - certified amount

8.36 The certified amount represents the employee contracted-out rebate due on earnings between the LELand the UEL, both the reduction to NICs payable and the NIC rebate given on earnings between theLEL and the Earnings Threshold despite there being no liability for NICs.

8.37 The certified amount is the additional NICs the employee would have paid if the employment had notbeen contracted-out.

8.38 Occupational pension schemes which elect to pay a CEP may recover the certified amount from anyrefund of contributions due to the employee, but not yet paid.

8.39 Recovery may also be made from any payment in lieu of benefit due to the employee. For this purpose, a payment in lieu of benefit is defined as a payment which is made, or is to be made,out of either

• resources other than those of the scheme, or

• the resources of the scheme, if the scheme is distributing the resources during wind up, or

• the resources of the scheme towards the provision of deferred benefits for the earner.

8.40 The certified amount may be calculated by schemes when

• a CEP is sent with form CA1611, or

• an urgent refund of superannuation contributions is required.

8.41 To calculate the certified amount, use this formula:

Formula

For each tax year, take the following actions:


• CEP amount

• amount of employee’s contribution reduction

2 divide by total employee’s and employer’s contribution reduction

3 round the calculation for each year up or down to the nearest 1p, taking 0.5 pence or higher as the next whole penny above

4 add the amounts for each tax year, to find the total certified amount


8.42 Where the certified amount calculation includes the 2000/2001 tax year onwards please note thatwhere the employee has not received the full NIC rebate on earnings between the LEL and theEmployee Earnings Threshold, a deduction equal to the amount of NIC rebate not enjoyed by theemployee, should be made to the Certified Amount.

8.43 Information provided on the P14 End of Year Return does not identify if the employee had low orfluctuating earnings that is where the employee may not have received the full NIC rebate on allearning between the LEL and the Employee Earnings Threshold. Therefore the Certified Amount willalways be calculated as though an employee has received the full NIC rebate on all earnings.However, if it is known that the employee had low or fluctuating earnings during the relevant

58

employment, the Certified Amount may need to be recalculated by the scheme using the relevantNICs information from the employer. See Appendix 4, example 5A.

8.44 If there has been a transfer of rights from a COMP scheme or the COMP part of a COMB scheme fora period after 6 April 1997, for which a CEP is payable, the certified amount for the post ‘97 COMPperiod must be calculated separately. If the period of service in the COMP scheme terminated

• on 5 April 1997, calculate the certified amount using the formula in paragraph 8.40

• on 6 April 1997, calculate the certified amount using the formula in paragraph 8.42.

8.45 To calculate the certified amount, apply the following formula:

Formula

For each tax year relating to the COMP/COMPSHP service, take the following actions:


• CEP amount

• amount of employee’s contribution reduction

2 divide by the employee’s and employer’s contribution reduction relevant to the COMP/COMPSHP service

3 round the calculation for each year up or down to the nearest 1p, taking 0.5 pence or higher as the next whole penny above

4 add the amounts together for each tax year, to find the total certified amount

5 for each tax year relating to the COSR service follow steps 1 to 4 but substitute the employee’s and employer’s contribution reduction relevant to the COSR service

6 add together the certified amounts for the COMP/COMPSHP and COSR service to obtainthe total certified amount

See Appendix 4, Example 5A

8.46 An employee cannot be required to pay back any money already refunded. Money cannot bewithheld from wages to recover the employee’s share of the premium.

8.47 If there is any dispute about the certified amount, send form CA1604 to Services to PensionsIndustry to obtain a calculation, see paragraph 1.25. See paragraph 8.43 for certified amountcalculation anomalies.

Service in a non-contributory pension scheme

8.48 The amount recoverable cannot exceed the employee’s share of the CEP attributable to the contributory service, if

• a transfer of accrued rights has been made from a non-contributory pension scheme to a contributory scheme or vice versa, and

• no part of the refund relates to the non-contributory employment.

8.49 The certified amount shown on form CA1620 (RD611) will be calculated on the contracted-out earnings paid for the whole of the period shown on the termination notice, form CA1611. This formmakes reference to the anomalies detailed at paragraph 8.43.

59

8.50 The Inland Revenue National Insurance Contributions Office records do not show if service was in a contributory or non-contributory pension scheme. A separate calculation is necessary to find the proportion of the certified amount attributable to the contributory employment. If this cannot bedetermined, send form CA1604 to Services to Pensions Industry, see paragraph 1.25.

When can a TP be paid?

8.51 A TP can only be paid if

• the date of election to transfer was 5 April 1997 or earlier, and

• the employee’s benefits in excess of the GMP rights are transferred to either

- an occupational pension scheme which is not contracted-out, or

- a personal pension scheme which is not an APP/APPSHP scheme, and

- the scheme has not ceased to contract-out, and

- there is no outstanding request from the employee for the GMP to be bought-out, and

- a CEP is not payable.

8.52 Payment of a TP

• discharges the scheme of its liability to provide a GMP, and

• buys the employee’s GMP rights back into the state scheme.

8.53 A TP cannot be paid for women who have paid reduced-rate contributions throughout the period ofcontracted-out employment.

8.54 If a woman has paid reduced-rate (E rate) contributions for part of the period of contracted-outemployment, the TP is based on the contributions paid between the LEL and UEL at the fullcontracted-out rate (D rate). Form CA1603 must show the full period of contracted-out employment.

Time limit for making the election

8.55 A scheme may elect to pay a TP within three months of the date on which the employee made thetransfer application. A TP cannot be paid if the date of election is 6 April 1997 or later.

Time limits for payment of TPs

8.56 TPs must be paid by the later of

• six months after the date of election to pay it

• one month after the date on which the transfer was made


Extension of time limits

8.57 The time limits for making payment may be extended in exceptional circumstances if payment cannotreasonably be made within the normal time limit. An application for an extension of the time limitsmust be made as outlined in paragraph 4.7.

60

8.58 The Commissioners of Inland Revenue can extend the time limits by

• up to six months, if satisfied that payment could not reasonably be made within the original period


8.59 If payment is not made within the time limit, liability for payment of the GMP and post ‘97 COSRrights remains with the scheme. Services to Pensions Industry will

• assess the GMP liability based on the contracted-out contributions/earnings notified by the employer

• revalue the earnings factors for GMP liability using Section 148 orders unless it is known that thescheme revalues at a fixed rate

• issue a statement of GMP liability.

Calculating a TP

8.60 To calculate the amount of a TP for GMPs or parts of GMPs built up before 6 April 1988:

Formula

Take the following actions:

1 multiply the weekly amount of GMP by 52

2 divide by 100

3 multiply by the Market Level Indicator (MLI), see paragraph 6.13

4 multiply by the amount from the appropriate Appendix 3 table


8.61 To calculate the amount of a TP for GMPs or parts of GMPs built up after 5 April 1988:

Formula

Take the following actions:

1 multiply the weekly amount of GMP by 52

2 divide by the average MLI

3 multiply by the MLI, see paragraph 6.16

4 multiply by the amount from the appropriate Appendix 3 table


61

8.62 If the election is made in a tax year after that in which the termination occurred

• the GMP must be fully revalued, up to and including the year of election, and

• this must be done before the TP is calculated.

8.63 If limited rate revaluation is used and an LRP has been paid, this will be taken into account. If paymenthas not been made, the LRP must be calculated and included with the payment.

8.64 The TP will include any incentive payments which have been made to the scheme in respect of theemployee and any interest payable. Interest is payable on any incentive payment made more thantwelve months before the election to pay the TP. The rate of interest is 8.5% per annum plus 8.5%dividend, divided by 365 days or 366 for leap years, per day for part years.

Notifying Services to Pensions Industry of the intention to pay a TP

What to do

8.65 If a TP is to be paid, notify Services to Pensions Industry

Step Action


2 make sure that the date of election is shown. The form may only be used for more thanone employee if the date of election is common to each employee shown

3 sign and date the form. Send the completed form to Services to Pensions Industry. It can be sent one month before the expected date of termination and up to six monthsafter the date of termination

8.66 The premium amount, including any incentive payment, is calculated by Services to Pensions Industryand is notified to the scheme on form CA1622. A TP of £17 or less for an employee is not required tobe paid.

8.67 If, following submission of form CA1603 and, if applicable, after receipt of the premium demand, thetransfer does not take place, see paragraph 4.51.

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Transferring Guaranteed Minimum Pension (GMP) rights and/orPost ‘97 Contracted-out Salary Related (COSR) Rights to other schemes

Employee’s right to a transfer value

9.1 Any employee leaving contracted-out employment has the right to a transfer value if

• contracted-out employment ends more than one year before the scheme’s normal pension age

• there are accrued rights to benefit under the scheme.

9.2 The right to a transfer value must be exercised by the later of

• six months after leaving the employment to which the scheme applies, or

• one year before reaching the scheme’s normal pension age.

Application process

9.3 From 6 April 1997, the trustees of a COSR or Contracted-out Mixed Benefit (COMB) scheme mustgive early leavers a statement of entitlement which represents the transfer value of their investment in the scheme, if they ask for one. The member may not, within a period of 12 months, make a further application unless the rules of the scheme or the trustees allow such a request to be made. The transfer value is the cash equivalent value of the employee’s rights built up in the scheme.

9.4 If the trustees cannot obtain the necessary information to calculate the cash equivalent for reasonsbeyond their control, they may take a longer period provided such a period does not exceed sixmonths beginning with the date of the member’s application.

9.5 A statement of entitlement must be given to the member within 10 days (excluding Saturdays,Sundays, Christmas Day, New Year’s Day and Good Friday) of the date at which the transfer value hasbeen calculated (the ‘guaranteed date’).

9.6 A member who has received a statement of entitlement, and wishes to transfer to another occupational pension scheme, or to an Appropriate Personal Pension (APP)/Appropriate PersonalPension Stakeholder Pension (APPSHP) scheme, must then submit a written application for a transfer.

9.7 The ‘guaranteed’ statement of entitlement does not become guaranteed until the member submits a written application for a transfer. This must be done within three months of the guarantee date.

9.8 Under normal circumstances, the limit for payment by a scheme of a guaranteed transfer value is sixmonths from the guarantee date, not the date of the written application to transfer. If the payment isdelayed without good cause, the transfer value should be increased to the amount that it would havebeen if it had been calculated on the day it was paid.

9.9 The scheme can pay the transfer value to

• any of the options outlined in this chapter, or

• to a suitable insurance company of the employee’s choice to buy an annuity which is outlined inChapter 10.

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Employee’s rights on termination of contracted-out employment

9.10 Any employees who left pensionable service on or after 1 January 1986, have the right to request atransfer value if

• contracted-out employment ended more than one year before the scheme’s normal pension ageor if later, six months after leaving pensionable service to which the scheme applies, and

• there are accrued benefits under the scheme.

9.11 From 6 April 1997, trustees must pay a transfer value, on request, to people who left the schemebefore 1986, unless the scheme has fully protected their rights against inflation. If this is the case,payment will be at the trustees’ discretion.

9.12 If an employee voluntarily leaves the scheme, but remains in service which would have been pensionable up to the guarantee date, the scheme may restrict the transfer value to the rights builtup after 5 April 1988. If the employee subsequently leaves the employment to which the schemeapplies, the rights built up before April 1988 can be transferred, providing the conditions set outabove for rights to a transfer value are satisfied.

What schemes can GMP Rights and/or Post ‘97 COSR Rights be transferred to?

9.13 GMP rights and/or post ‘97 COSR rights built up in a COSR scheme or a Section 53 (formerly contracted-out) Salary Related scheme may be transferred to

• another COSR scheme, or

- a Section 53 (formerly contracted-out) Salary Related scheme and the member applied for the transfer before 6 April 1997, see paragraph 9.19, or

• a Contracted-out Money Purchase (COMP)/Contracted-out Money Purchase Stakeholder pension(COMPSHP) scheme, or

- a Section 53 (formerly contracted-out) Money Purchase scheme and the member applied for the transfer before 6 April 1997, see paragraph 9.36, or

• an active COMP or COSR part of a COMB scheme, see paragraph 9.43, or

• an APP/APPSHP scheme, see paragraph 9.46, or

• an overseas occupational pension scheme other than one which is or was contracted-out and isstill under the financial supervision of Services to Pensions Industry, or

- if COSR rights are entirely post ‘97 rights, an overseas arrangement, see paragraph 9.52, or

• an overseas occupational pension scheme which is or was contracted-out and is still under thefinancial supervision of Services to Pensions Industry, see paragraph 9.61, or

• different destinations, if they are split provided each one is one of the above alternatives.

9.14 GMP and/or post ‘97 COSR rights bought-out by means of an insurance policy or annuity contractmay also be transferred, see Chapter 10.

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Consent to a transfer

9.15 The employee’s written consent must normally be obtained before a transfer may take place.

9.16 The employee’s consent is not required if

• both schemes relate to COSR employment with the same employer, or

• the pension rights of all COSR scheme members, or a specific group of which the employee is amember, are being transferred to another COSR scheme

• the scheme is wound up or ceases to contract-out, see manual CA15 Cessation of Contracted-OutPension Schemes for further information

• a connected employer transfer is made to a COSR scheme if

- the transfer or transfer payment is a consequence of a financial transaction between the employers

- each of the employers is one of a group of companies consisting of a holding company and one or more subsidiaries, or

- the employers are associated employers within the meaning of Section 590A(3) and (4) of the Income and Corporation Taxes Act 1988(c).

9.17 The transferring scheme must be satisfied that the rights in the new scheme are broadly equivalent tothe rights transferred.

9.18 If a transfer is made without the employee’s consent, and the employee is

• an active member of the scheme, a transfer value on termination of pensionable service with thereceiving scheme will apply to the rights built up in the first scheme, see paragraph 9.10

• a deferred member of the scheme, the member acquires an immediate right to take a cash equivalent from the receiving scheme (or insurance policy).

Transfer to a COSR scheme or the active COSR part of a COMB scheme or a Section 53 (formerly contracted-out) Salary Related scheme

9.19 A transfer may be made if

• the employee consents in writing, and

- is employed by an employer who is a contributor to the receiving scheme, or

- has previously been a member of the receiving scheme, or

- is not in contracted-out employment, and the employer is, or for a Section 53 (formerly contracted-out) Salary Related scheme is or was a contributor to the receiving scheme, and the member applied for the transfer before 6 April 1997

• GMP rights have been transferred. The scheme accepting the transfer must provide for

- pensions to be payable at the same rates at which the GMP would have been payable if there had been no transfer, and

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- the conditions of payment relating to its own GMPs to apply equally to such pensions and commutation

• post 6 April 1997 COSR rights have been transferred. The transfer payment is applied to providerights for the employee, which had they accrued in the receiving scheme would be equal to thosefor employees who

- are in employment which is contracted-out in relation to the receiving scheme, or

- have been in contracted-out employment with the receiving scheme.

9.20 There is no need to tell Services to Pensions Industry if an employee moves, within six months, fromone COSR scheme to another operating under the same Employer’s Contracting-out Number (ECON)if the rights accrued under the original scheme are also transferred. If there was entitlement toincentive payments in respect of one or both of the schemes, see paragraph 2.21, Services to PensionsIndustry must always be notified in writing at the time the employee changes scheme. If the rights areheld in the original scheme, then that scheme must submit a notice of termination.

9.21 If the receiving scheme continues to revalue any GMP at the same rate, or changes the rate (forGMPs) to Section 148, the Section 148 rate must be used from the earlier termination date. Schemeswishing to do this must advise Services to Pensions Industry in writing. Any Limited RevaluationPremium (LRP) paid is refunded to the scheme making the transfer.

9.22 The receiving scheme must revalue the GMP rights accrued up to 5 April 1997. There are no InlandRevenue National Insurance Contributions Office restrictions as to whether fixed, limited or Section148 revaluation can be applied, unless

• a transfer has previously taken place, but the rules of the transferring and receiving schemes mayimpose restrictions

• the termination date is on or after 6 April 1997, in which case limited rate revaluation is no longeran option. Schemes which previously used limited rate revaluation must use Section 148 orders orfixed rate revaluation.

9.23 If the person whose pension rights are transferred is not in contracted-out employment covered bythe receiving scheme, the scheme must look after the GMP rights accrued up to 5 April 1997 and/orpost ‘97 COSR rights as if they were

• currently in employment covered by the new scheme, or

• formerly in employment covered by the scheme, if

- it is a Section 53 (formerly contracted-out) Salary Related scheme, and

- the member applied for the transfer before 6 April 1997.

Previous transfer with Section 148 revaluation

9.24 If a transfer has previously taken place with Section 148 revaluation and pension rights are transferredagain, the periods linked by Section 148 transfers are treated as one. The later transfer can be treatedas a first transfer.

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Previous GMP transfer with fixed or limited rate revaluation

9.25 If a transfer of GMP rights has previously taken place with the revaluation at fixed or limited rate andpension rights are transferred again, the new scheme must

• revalue the previously transferred rights at the same rate, or

• choose to change the rate of revaluation being applied to previously transferred rights from fixedor limited rate to Section 148. The Section 148 rate must be used from the earlier terminationdate. Any LRP paid is refunded.

Schemes wishing to do this must advise Services to Pensions Industry in writing.

Transfer of liability for payment of pensioner’s GMP and/or Post 6 April 1997COSR Rights

9.26 The liability for payment of a GMP and/or post ‘97 COSR rights on maturity may be transferred to aCOSR scheme or the active COSR part of a COMB scheme if the receiving scheme provides for thepension to

• commence from the date from which it has accepted liability to pay

• be subject to the same conditions as GMP and/or post ‘97 COSR rights built up in the receiving scheme.

Limited revaluation - payment of premiums on transfer

9.27 The transferring scheme is liable for payment of an LRP, but it may be paid by the trustees of thereceiving scheme.

Refund of an LRP

9.28 An LRP is refunded by Services to Pensions Industry if

• a receiving scheme chooses to change the revaluation rate of previously transferred GMP rightsfrom limited to Section 148, or

• GMP rights have previously been preserved in a scheme at the limited rate and a transfer at thefixed or Section 148 rate then takes place

• the date of leaving contracted-out employment is 6 April 1997 or later.

9.29 An LRP is refunded by Services to Pensions Industry on receipt of the relevant transfer form, if atransfer payment including GMP rights subject to limited rate revaluation is made to either

• a COMP/COMPSHP scheme

• a Section 53 (formerly contracted-out) Money Purchase scheme (such a transfer is only allowed ifthe member applied for the transfer before 6 April 1997), or

• an APP/APPSHP scheme.

The refund is made to the scheme making the transfer.

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Notification to use if the employee is in contracted-out employment underthe receiving scheme

What to do

9.30 If the employee is taking up contracted-out employment under the receiving scheme, notifyServices to Pensions Industry:

Step Action

1 if the date of leaving is:

• 5 April 1997 or earlier complete form:

- CA1617 for Section 148 revaluation

- CA1599 for fixed rate revaluation

- CA1600 for limited rate revaluation with payment of an LRP, or

• on or after 6 April 1997, fill in form CA1887

2 sign and date the form. Send the completed form to Services to Pensions Industry withinfive weeks of the date of the transfer payment

Statements

9.31 If a GMP is wholly or partially included in the transferred rights, a statement form CA1625 is sent tothe receiving scheme. The amount quoted does not take account of any pension rights shared ondivorce.

9.32 If the COSR rights which are transferred are based on service which began on or after 6 April 1997, astatement of transfer of contracted-out liability, form CA1899, will be issued to the receiving scheme.

Notification to use if the employee is not in contracted-out employment under the receiving scheme

What to do

9.33 If the employee is not taking up contracted-out employment under the receiving scheme, notify Services to Pensions Industry:

Step Action

1 fill in form:

• CA1889, if a notice of termination has not previously been sent, or

• CA1888, if a notice of termination has previously been sent

2 make sure that the form is signed and dated. The completed form must be sent toServices to Pensions Industry within five weeks of the date of the transfer payment

9.34 If a notice of termination has already been sent and the rate of revaluation is changed, send formCA1889 to Services to Pensions Industry noted ‘Change of Preservation’.

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Statements

9.35 A statement of contracted-out liability, form CA1899, will be issued to the receiving scheme.

Transfer to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme or a Section 53(formerly contracted-out) Money Purchase scheme

9.36 A transfer of GMP/post ‘97 COSR rights may be made to a COMP/COMPSHP scheme or the activeCOMP part of a COMB scheme or a Section 53 (formerly Contracted-out) Money Purchase scheme if




- is not in contracted-out employment, and the employer is, or for a Section 53 (formerly contracted-out) Money Purchase scheme is (or was) a contributor to the scheme and the member applied for a transfer before 6 April 1997, and

• the receiving scheme uses the transfer payment to provide money purchase benefits in the formof protected rights, and

• if GMP rights are transferred, the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

9.37 Any fixed or limited rate revaluation applying to any GMP rights before the transfer was made mustbe replaced by Section 148 revaluation to determine at state pension age (SPA), or death if earlier, theamount to be deducted from the additional pension entitlement, see paragraph 2.17. Any LRP thatwas previously paid is refunded, see paragraph 9.28.

9.38 There is no need to tell Services to Pensions Industry if an employee moves, within six months, from aCOSR scheme to a COMP scheme operating under the same ECON if the rights accrued under theoriginal scheme are also transferred. If there was entitlement to incentive payments in respect ofone or both of the schemes, see paragraph 2.21, Services to Pensions Industry must always be notifiedin writing at the time the employee changes schemes. If the rights are held in the original scheme,then that scheme must submit a notice of termination.


What to do

9.39 If the employee is taking up contracted-out employment under the receiving scheme, notifyServices to Pensions Industry as follows:

Step Action

1 fill in form:

• CA1601, if the date of termination is on or before 5 April 1997, or

• CA1887, if the date of termination is on or after 6 April 1997


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Statements

9.40 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets incentive and/or age related payment information on a paper schedule. If the receiving scheme gets payment information via magnetic media, then confirmation of any incoming transfer will be included in this information. For further details, see manual CA70, MagneticMedia Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.

Notification to use if the employee is not in contracted-out employmentunder the receiving scheme

What to do

9.41 If the employee is not taking up contracted-out employment under the receiving scheme, notifyServices to Pensions Industry:

Step Action

1 fill in:




Statements

9.42 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets incentive and/or age related payment information on a paper schedule. If the receiving scheme gets payment information via magnetic media, then confirmation of any incoming transfer will be included in this information. For further details, see manual CA70, MagneticMedia Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.

Transfer to the active COMP or COSR part of a COMB scheme

9.43 A transfer of GMP/post ‘97 COSR rights may be made to the active COMP or active COSR part of aCOMB scheme.

9.44 A transfer payment may also be made by the active COSR part of a COMB scheme to the activeCOMP part of the same COMB scheme, or vice versa.

9.45 To notify Services to Pensions Industry, use the forms detailed in paragraph 9.39.

Transfer to an APP/APPSHP scheme

9.46 A transfer payment of GMP/post ‘97 COSR rights may be made to an APP/APPSHP scheme if the

• employee consents in writing, and

• receiving scheme uses the transfer payment to provide money purchase benefits in the form ofprotected rights, and

• if GMP rights are transferred, the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

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9.47 Any fixed or limited rate revaluation applying to the GMP rights before the transfer was made, mustbe replaced by Section 148 revaluation to determine at SPA, or death if earlier, the amount to bededucted from the AP entitlement. Any LRP paid is refunded, see paragraph 9.28.

Notification to use if the employee is currently contributing to the APP/APPSHP scheme

What to do

9.48 If the employee is currently contributing to the APP/APPSHP scheme, notify Services toPensions Industry:

Step Action

1 fill in form:

• CA1602, if the date of leaving is 5 April 1997 or earlier, or

• CA1887, if the date of leaving is 6 April 1997 or later


Statements

9.49 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets minimum contributions (MCs) payment information on a paper schedule. If thereceiving scheme gets MCs payment information via magnetic media, then confirmation of anyincoming transfers will be included in this information. For further details, see manual CA70, MagneticMedia Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.

Notification to be used if the employee is not currently contributing to theAPP/APPSHP scheme

What to do

9.50 If the employee is not currently contributing to the APP/APPSHP scheme, notify Services toPensions Industry:

Step Action

1 fill in form:




Statements

9.51 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets MCs payment information on a paper schedule. If the receiving scheme gets MCspayment information via magnetic media, then confirmation of any incoming transfers will be included in this information. For further details, see leaflet CA70, Magnetic Media Transmission of Datato Appropriate Personal Pension, Contracted-out Occupational Schemes and Contracted-out StakeholderPension Schemes.

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Transfer to an overseas occupational pension scheme or overseas arrangement other than one which isor was contracted-out and still under the financial supervision of Services to Pensions Industry

9.52 GMP rights accrued prior to 6 April 1997 can be transferred to an overseas occupationalpension scheme.

9.53 COSR rights accrued from 6 April 1997 can be transferred to an

• overseas occupational pension scheme, or

• overseas arrangement.

9.54 The responsibility for operating all overseas transfer arrangements will lie with the exporting scheme.

9.55 For rights accrued pre 6 April 1997, the transferring scheme must provide that the transfer payment isof a cash value at least equivalent to the GMP rights.

9.56 A transfer payment of GMP rights to an overseas scheme, or a transfer payment of post 6 April ‘97COSR rights to either an overseas occupational scheme or overseas arrangement may be made if the


• trustees of the transferring scheme have taken reasonable steps to satisfy themselves that the employee:

- has emigrated on a permanent basis, and

- if the receiving scheme is an occupational pension scheme, that the employee is in employment related to the receiving scheme, and

• employee has acknowledged in writing that the scheme or arrangements to which the transferpayment is to be made may not be regulated by United Kingdom (UK) law. Consequently, theremay be no obligation under that law on the receiving scheme or arrangement or its trustees oradministrators to provide any particular value or benefit in return for the transfer payment, and

• trustees of the transferring scheme or arrangement have taken reasonable steps to satisfythemselves that the employee has received a statement from the receiving scheme orarrangement showing

- the benefits to be awarded for the transfer payment, and

- any conditions on which these could be forfeited or withheld.

9.57 The member or widow/widower of the member has no recourse to the transferring scheme or thestate scheme to make good any shortfall in the GMP equivalent benefit or any benefits accrued inrespect of post ‘97 COSR rights eventually paid by the receiving scheme.

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Notification to use

What to do

9.58 If an employee’s GMP rights are transferred to an overseas scheme, or post ‘97 COSR rights aretransferred to an overseas scheme or overseas arrangement, notify Services to Pensions Industry:

Step Action


2 make sure that it is signed by both the member and the scheme. The completedform must be sent to Services to Pensions Industry within five weeks of the date ofthe transfer payment

Statements

9.59 No statements will be issued.

Transfer to an overseas scheme which is or was contracted-out and is still under the financial supervision of Services to Pensions Industry

9.60 A transfer to an overseas scheme which is a contracted-out scheme or a Section 53 (formerly contracted-out) Salary Related scheme may take place in the same way as a transfer to a UK basedscheme. Where the transfer is to an overseas scheme which is a section 53 scheme, the member musthave applied for the transfer before 6 April 1997.

9.61 If the accrued rights include the GMP and/or post ‘97 COSR rights, the transfer will be at the member’s own risk. The procedures to notify Services to Pensions Industry of the transfer depend onthe scheme to which the rights are transferred, see paragraph 9.13.

Splitting the GMP and/or Post ‘97 COSR Rights

9.62 If an employee leaves a COSR scheme or active COSR part of a COMB scheme voluntarily withoutleaving the employment and exercises the right to a transfer of the rights built up since 5 April 1988,see paragraph 9.10. The scheme may restrict any transfers to those rights built up after 5 April 1988.

9.63 The GMP built up

• before 6 April 1988, will normally be

- retained in the scheme, unless the trustees agree to a transfer, and

- revalued in the line with the scheme’s chosen rate of revaluation

• after 5 April 1988, can be

- transferred, or

- bought-out through an insurance company as a GMP.

9.64 When the employment ends, if the employee

• wishes to transfer any pre 6 April 1988 GMP retained in the scheme, the relevantnotification must be forwarded to Services to Pensions Industry showing the full period ofcontracted-out employment.

9.65 From 6 April 1997, pension rights accrued 5 April 1997 or earlier may be split from those accruedfrom 6 April 1997 or later and transferred in different directions.

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9.66 From 6 April 1997, a transfer into a COMB scheme with two active parts can be split between theCOSR and COMP parts of the scheme.

9.67 For the purposes of calculation and any subsequent revaluation of the separate parts of the employment, use the date of leaving the scheme. This date must be used to ensure that the separateparts are accurately calculated, eg the Section 148 order made in the tax year of termination is usedto revalue the earnings factors in the calculation of the pre 6 April 1988 GMP.

What to do

9.68 When the transfer of GMP rights is restricted to those rights built up after 5 April 1988, the schememust notify Services to Pensions Industry:

Step Action

1 fill in form:

• CA1607, showing the full period of contracted-out employment, and

• CA1610, if the post 5 April 1988 GMP is to be bought-out through an insurance company. The date of commencement to be shown on this form CA1610 is 6 April 1988, see Chapter 10

2 sign and date the form. Send the completed form to Services to Pensions Industry withinfive weeks of the date of the transfer payment and/or buy-out

9.69 Write and tell Services to Pensions Industry of the details if the

• pension rights accrued 5 April 1997 or earlier and the pension rights accrued 6 April 1997 or laterare split and transferred to different schemes

• transfer of the pension rights accrued 5 April 1997 or earlier are also restricted to the rights builtup after 5 April 1988.

Services to Pensions Industry will then advise the transferring scheme of the correct action to take.

Incoming transfer from a COMP/COMPSHP or APP/APPSHP scheme

Date of leaving on or before 5 April 1997

9.70 For periods of protected rights which were transferred in from a COMP or APP scheme, if the date ofleaving was on or before 5 April 1997 and the scheme operated limited rate revaluation up to 5 April1997, an LRP must be paid.

9.71 The amount of LRP will be calculated and, in the case of a transfer from an APP scheme, the MarketLevel Indicator to be used in the calculation, will be the one appropriate to 5 April in the year of termination. This is because all APP arrangements terminate on 5 April each tax year.

9.72 The amount of LRP

• will be notified on form CA1620

• must be paid within the normal time limits.

9.73 The receiving COSR scheme is liable for payment of an LRP.

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Age related payments following the transfer

9.74 Any age related rebate which falls due in respect of the 97/98 or later tax year following the transfer-in from a COMP/COMPSHP scheme will be offered to the COSR/COMB scheme. If refused,the monies will be retained in the National Insurance Fund.

9.75 Any age related rebate which falls due in respect of the 97/98 or later tax year following the transfer-in from an APP/APPSHP scheme, in relation to new or adjusted earnings, will not be paidto either the transferring or receiving scheme, the earnings will accrue additional state pensionentitlement. The monies will be retained in the National Insurance Fund.

Buying out a Guaranteed Minimum Pension (GMP) and/orPost ‘97 Contracted-out Salary Related (COSR) Rights

When can a buy-out take place?

10.1 As an alternative to providing a GMP and/or post ‘97 COSR rights, schemes may discharge theirresponsibility to provide a pension by purchasing an insurance policy or annuity contract for theirmember(s). This can be arranged on or after termination of contracted-out employment.

10.2 In addition, any employee terminating pensionable service on or after 1 January 1986 has the right,subject to conditions in paragraphs 9.1 and 10.4, to opt for the accrued pension rights, includingGMP and/or post ‘97 COSR rights, to be bought out. A widow’s or widower’s pension rights may alsobe bought out.

10.3 Schemes which revalue using Section 148 orders can use fixed or limited rate revaluation if an earlyleaver’s GMP rights are bought-out. However, the limited rate only applies if the buy-out takes placeon or before 5 April 1997.

Conditions for a buy-out

10.4 If schemes are to be discharged from their liability to provide pension rights, the policy or annuitycontract must satisfy all of the following conditions. It must

• be bought from or entered into with an insurance company which

- meets specific statutory requirements

- assumes an obligation to pay the pension rights to the employee or widow/widower, or to the trustees of a trust for their benefit

• provide a pension at State Pension Age (SPA) that is at least equal to the GMP and/or post ‘97COSR rights

• provide for the occupational pension to be revalued by the appropriate rate, if purchased beforethe employee reaches SPA

• provide for a GMP, or that part of it built up from 6 April 1988, to be inflation-proofed after itbecomes payable, see paragraph 12.18

• ensure that the GMP rights cannot be

- paid as a lump sum except as in paragraph 12.14

- transferred except as in paragraph 10.12

10

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• have been bought, or a contract entered into, at the request or with the consent of the employeeor widow or widower unless

- the buy-out took place before January 1986, or

- the scheme is wound-up, or

- the circumstances in paragraph 10.5 apply.

Buy-out without consent

10.5 From 6 April 1988, COSR schemes can buy-out GMP rights and/or post ‘97 COSR rights without consent if all of the following conditions are satisfied:

• more than 12 months have elapsed since the employee’s service terminated

• the scheme gives the employee written notice of their intention at least 30 days before the buy-out is due to be made

• when the buy-out takes place there is no outstanding written application for a transfer value, and

• the conditions in paragraph 10.4, other than member’s consent, are satisfied.

10.6 A widow’s/widower’s accrued pension rights may also be bought-out.


What to do

10.7 Notify Services to Pensions Industry as follows:

Step Action

1 fill in form:

• CA1610, if employment ends before the year of SPA and a notice of termination has previously been sent, or

• CA1891, if employment ends before the tax year of SPA and a notice of termination has not already been sent

2 make sure that the form is signed and dated by both the scheme and the insurance company

3 send the completed form to Services to Pensions Industry within five weeks of the dateof the buy-out

10.8 If a notice of termination has already been sent and the rate of revaluation is changed, a revised formCA1891 noted ‘Change of preservation’, must be sent to Services to Pensions Industry.

10.9 If employment ends in the tax year of SPA, only form CA1610 is needed.

Statements

10.10 If the period of employment is entirely pre 6 April 1997 or spans 6 April 1997, form CA1623 (RD694)will be issued confirming the GMP amount to the insurance company through which the GMP rightsare being bought out. The amount quoted does not take account of any pension rights sharedon divorce.

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10.11 If the period of employment is entirely post 6 April 1997, a statement of transfer of contracted-outpension liability, form CA1899, will be issued to the insurance company through which the COSRscheme rights are being bought out.

Transferring bought-out GMP and/or Post ‘97 COSR Rights

10.12 Pension rights bought-out by means of an insurance policy or annuity contract may be transferred to

• another policy or annuity contract

• a COSR scheme, the active COSR part of a Contracted-out Mixed Benefit (COMB) scheme, or

- a Section 53 (formerly contracted-out) Salary Related scheme if the member applied for the transfer before 6 April 1997

• a Contracted-out Money Purchase (COMP)/Contracted-out Money Purchase Stakeholder Pension(COMPSHP) scheme, the active COMP part of a COMB scheme, or

- a Section 53 (formerly contracted-out) Money Purchase scheme if the member applied for the transfer before 6 April 1997

• an Appropriate Personal Pension (APP)/Appropriate Personal Pension Stakeholder Pension(APPSHP) scheme, or

• an Overseas Occupational pension scheme, or

- Overseas arrangement if the rights are entirely post ‘97 COSR rights.

10.13 A transfer to another policy or annuity contract must satisfy the conditions in paragraph 10.4.

10.14 If after completion of a buy out, a subsequent buy out or transfer takes place, the transferringinsurance company must advise Services to Pensions Industry in writing.

Transfer to a COSR scheme or the active COSR part of a COMB scheme

10.15 A transfer of bought-out COSR rights may be made to a COSR scheme, the active COSR part of aCOMB scheme, or a Section 53 (formerly contracted-out) Salary Related scheme and the memberapplied for the transfer before 6 April 1997, if




- is not in contracted-out employment but in the case of a transfer to a Section 53 (formerly contracted-out) Salary Related scheme is or was a contributor to the receiving scheme, and the member applied for the transfer before 6 April 1997


- pensions to be payable at the same rates at which the GMP would have been payable if there had been no transfer, and


77

• post 6 April 1997 COSR rights have been transferred. The transfer payment is applied to provide rights for the employee. If these rights had accrued in the receiving scheme, they would be equal to those for employees who

- are in employment which is contracted-out in relation to the receiving scheme, or

- have been in contracted-out employment with the receiving scheme.

10.16 If the receiving scheme continues to revalue any GMP at the same rate, or changes the rate (for GMPs) to Section 148, the Section 148 rate must be used from the earlier termination date.Schemes wishing to do this must advise Services to Pensions Industry in writing. Any LimitedRevaluation Premium (LRP) paid is refunded to the receiving scheme.

Transfer to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme

10.17 A transfer of bought-out COSR rights may be made to a COMP/COMPSHP scheme, the active COMPpart of a COMB scheme, or a Section 53 (formerly contracted-out) Money Purchase scheme and themember applied for the transfer before 6 April 1997, if




- is not in contracted-out employment but in the case of a transfer to a Section 53 (formerly contracted-out) Money Purchase scheme is or was, a contributor to the receiving scheme and the member applied for the transfer before 6 April 1997


• if GMP rights are transferred the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

10.18 Any fixed or limited rate revaluation applying to the GMP rights before the transfer must be replacedby Section 148 revaluation to determine at SPA, or earlier death, the amount to be deducted fromstate Additional Pension (AP) entitlement.

Transfer to an Appropriate Personal Pension (APP)/APPSHP scheme

10.19 A transfer of bought-out COSR rights may be made to an APP/APPSHP scheme, if



• if GMP rights are transferred the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

10.20 Any fixed or limited rate revaluation applying to the GMP rights before the transfer must be replacedby Section 148 revaluation to determine at SPA, or earlier death, the amount to be deducted from thestate AP entitlement.

10.21 Any LRP paid is refunded to the insurance company.

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Transfer to an overseas scheme or an overseas arrangement

10.22 A transfer of bought-out GMP rights may be made to an overseas scheme, or a transfer of bought-outpost ‘97 COSR rights may be made to an overseas scheme or overseas arrangement if the


• trustees of the transferring scheme have taken reasonable steps to satisfy themselvesthat the employee

- has emigrated on a permanent basis, and

- is in employment related to the receiving scheme, if the receiving scheme is anoccupational pension scheme, and

• the employee has acknowledged in writing that the scheme or arrangements to which the transfer payment is to be made may not be regulated by United Kingdom (UK) law. Consequentlythere may be no obligation under that law on the receiving scheme or arrangement, or itstrustees or administrators, to provide any particular value or benefit in return for the transfer payment, and

• the trustees of the transferring scheme have taken reasonable steps to satisfy themselves that theemployee has received a statement from the receiving scheme or arrangement showing

- the benefits to be awarded for the transfer payment, and

- any conditions on which these could be forfeited or withheld.

• for rights accrued pre 6 April 1997, the transferring scheme must provide that the transferpayment is of a cash value at least equivalent to the GMP rights.


10.23 If a transfer of bought-out post ‘97 COSR rights is made to an overseas scheme or arrangement, notifyServices to Pensions Industry as follows:

Step Action

1 the insurance company must supply Services to Pensions Industry with writtenconfirmation that:

• the member has transferred to an overseas scheme or arrangement and that the liability rests with the scheme, and

• the member has received a statement from the overseas scheme or arrangement stating that those benefits awarded and any conditions on which these could be forfeited or withheld

2 the member must supply Services to Pensions Industry with written confirmationthat they:

• are emigrating on a permanent basis, and

• have received a statement from the overseas scheme or arrangement to which the transfer payment is to be made, and

• understand that the receiving scheme is not to be regulated by UK law and accept the risks involved

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Contracted-out Mixed Benefit (COMB) schemes

Background

11.1 In order for a scheme to be contracted-out before 6 April 1997, it must have done so either as a Contracted-out Salary Related (COSR) or Contracted-out Money Purchase (COMP) scheme.

11.2 A scheme could not be contracted-out by both routes simultaneously, nor could a COSR schemebecome a COMP scheme (or vice versa) unless it had

• first ceased to contract-out and discharged its liability to pay either

- Guaranteed Minimum Pensions (GMPs), or

- protected rights, and

• then re-elected to contract-out on the other basis.

Schemes operating an active COMP and COSR part

11.3 Under the Occupational Pension Schemes (Mixed Benefit Contracted-out Schemes) Regulations 1996,a COSR scheme can, from 6 April 1997, open a COMP part and be contracted-out on both a salaryrelated and money purchase basis at the same time.

11.4 From 6 April 1998, this provision has been available to COMP schemes who wish to open a COSRpart This enables some members to be in the salary related part and others in the money purchasepart of the same scheme.

11.5 Transfers between the two parts of the scheme are allowed and subject to scheme rules, a membermay be able to transfer within the scheme at any time. COMB schemes may also be able to transferrights built up in one part of the scheme to the other part, provided the member’s individual consentis obtained.

11.6 It is also possible for the scheme to make one part of the COMB scheme inactive. Details of theprocedures to be followed to make one of the parts of the COMB scheme inactive are provided inmanual CA14E Contracted-out Guidance for Mixed Benefit Pension Schemes and Mixed BenefitOverseas Schemes.

11.7 Details of the procedures to be followed in respect of the supervision of the inactive part are providedin manual CA15 Cessation of Contracted-out Pension Schemes.

COSR schemes switching to COMP status from 6 April 1997

11.8 Under a second set of regulations amended by The Occupational Pension Schemes (Contracting-out)Amendment Regulations 1996, a live COSR scheme as at 5 April 1997 could switch to COMP statuson 6 April 1997, and from that date commence accruing contracted-out pension rights on a moneypurchase basis.

11.9 GMPs accrued up to and including 5 April 1997 will be held within the pre ‘97 COSR part of thescheme and supervised by Services to Pensions Industry in the same way as GMPs held in formerlycertified schemes. Details on the supervision of formerly certified schemes are provided in manualCA15 Cessation of Contracted-out Pension Schemes.

11.10 Contracted-out rights accrued from 6 April 1997 will be on a money purchase basis only and detailsof the termination procedures for this type of COMB scheme are provided in manual CA14ATermination of Contracted-out Employment - Manual for Money Purchase Pension Schemes and MoneyPurchase Parts of Mixed Benefit Schemes.

11

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COMB schemes operating both active COMP and COSR parts

11.11 This chapter of the manual provides guidance for COMB schemes, ie schemes which are contracted-out on both a salary related and money purchase basis at the same time, and sets out theprocedures to be followed when a member leaves the COSR part.

11.12 Details of the procedures required when a member leaves the COMP part are provided in manualCA14A Termination of Contracted-out Employment - Manual for Money Purchase Pension Schemes andMoney Purchase Parts of Mixed Benefit Schemes.

Notifications of termination of employment within a COMB scheme

11.13 Services to Pensions Industry must be notified whenever membership of the COMB scheme terminatesbefore the start of the tax year in which State Pension Age (SPA) is reached, see paragraph 3.1.

11.14 Membership of the COMB scheme is treated as terminated when the member leaves the COMBscheme overall. Membership of the COMB scheme is not treated as terminated when the memberleaves the COSR part to join the COMP part and does not transfer their past accrued rights.

11.15 If only COSR rights have accrued in the COMB scheme they may be

• retained in the scheme, see paragraphs 11.36 to 11.39

• transferred to another COMB, COMP/Contracted-out Money Purchase Stakeholder Pension(COMPSHP), COSR or Appropriate Personal Pension (APP)/Appropriate Personal PensionStakeholder Pension (APPSHP) scheme, see paragraphs 11.49 to 11.75

• transferred to an overseas occupational pension scheme or overseas arrangement in limitedcircumstances, see paragraphs 9.52 to 9.60

• bought-out by means of an insurance policy or annuity contract, see Chapter 10

• bought back into the state scheme, subject to certain conditions, by the payment of aContribution Equivalent Premium (CEP), see paragraphs 11.40 to 11.42.

11.16 If both COSR and COMP pension rights have accrued in the COMB scheme, and they are not to besplit, they may only be

• retained in the scheme, see paragraphs 11.36 to 11.39

• transferred to another COMB, COMP/COMPSHP, COSR, APP/APPSHP, see paragraphs 11.49 to 11.77

• transferred to an overseas occupational pension scheme or overseas arrangement in limitedcircumstances, see paragraphs 9.52 to 9.60.

11.17 If the accrued COSR and COMP rights are to be split, see

• paragraphs 9.63 to 9.70, about splitting the GMP and/or post ‘97 COSR rights, and

• paragraphs 11.40 to 11.42, for circumstances in which a CEP may be payable.

Notifications to use

11.18 The notifications to use are those relevant to the part of the scheme at the date of leaving,ie if the member was in the COSR part upon leaving the COMB scheme, then the appropriateCOSR notification should be forwarded to Services to Pensions Industry. The notifications to be usedare listed at Chapter 3.

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Responsibility for notification

11.19 The responsibility for notification of termination of contracted-out employment may be delegated toone body, eg to a scheme or insurance company, although most termination forms require entries byboth the employer and the scheme.

Time limits for notifications

11.20 The time limit for notifications is detailed in paragraph 4.6. An extension of those limits may beapproved on application to Services to Pensions Industry as explained in paragraph 4.7.

Internal transfers between parts of a COMB scheme

11.21 Depending on scheme rules the following internal transfer options may be made available tomembers:

• transfer of membership only from the COSR part to the active COMP part of the same COMBscheme

• transfer of membership and past accrued GMP and/or post ‘97 COSR rights from the COSRpart to the active COMP part of the same COMB scheme.

11.22 For internal transfers of rights or membership from the COMP part of the scheme, see Chapter 7 ofmanual CA14A Termination of Contracted-out Employment - Manual for Money Purchase Pension Schemesand Money Purchase Parts of Mixed Benefit Schemes.


11.23 The employees consent must always be obtained before a transfer of accrued rights can take place.

Internal transfer of membership and accrued GMP and/or Post ‘97 COSR Rights from the COSR partto the active COMP part of the same COMB scheme

What to do

11.24 Services to Pensions Industry will always require notification of transfers of membership and pastaccrued GMP and/or post ‘97 COSR rights from the COSR part to the active COMP part of thesame COMB scheme.

Step Action

1 fill in form:

• CA1601, if the date of termination in the COSR part (this includes transfers of GMP rights where the COMB scheme was originally a COSR scheme) is on or before 5 April 1997, or

• CA1887, if the date of termination in the COSR part (this includes transfers of GMP and/or post ‘97 COSR rights where the COMB scheme was originally a COSR scheme) is on or after 6 April 1997


Statements

11.25 Where form CA1601 or CA1887 is received, a statement of transfer of protected rights liability, formCA1882, will be issued to the scheme.

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Internal transfer of membership only from the COSR part to the active COMP part of a COMB schemeand previously accrued COSR rights are retained in the COSR part of the COMB scheme

11.26 If the member transfers to the active COMP part, but leaves his accrued COSR rights in the COSRpart of the COMB scheme, no notification is normally required, but see paragraph 11.30.

11.27 An appropriate notification will however be required when the member terminates contracted-outemployment in the COMB scheme overall. At termination stage, Services to Pensions Industry will

• identify any pre ‘97 rights as COSR rights, and

• calculate a GMP using the Section 148 revaluation order relevant to the tax year of leaving theCOMB scheme.

Identification of the type of Pre ‘97 Rights held in a COMB scheme

11.28 In a COMB scheme, Services to Pensions Industry will identify any pre ‘97 rights as either COSR orCOMP rights, via the Scheme Contracted-out Number (SCON) shown on any terminationnotification received.

11.29 However, there will be occasions when Services to Pensions Industry will not be able to identify thetype of pre ‘97 rights for a COMB scheme where the employer ran other salary related and moneypurchase contracted-out schemes before one of the schemes became a COMB scheme and thentransferred members from the existing schemes into the COMB scheme.

11.30 In these cases, Services to Pensions Industry will always need to be notified when an employeetransfers from the COSR part of a COMB scheme to the active COMP part of the same COMBscheme, if the following criteria are met:

• the employee transfers membership only (and not their accrued rights) from the COSR to theactive COMP part

• the period of contracted-out employment in the COSR part (including any service in the originalCOSR scheme) started before 6 April 1997, and

• the employer operates, or has operated, another contracted-out scheme(s) independently of theCOMB scheme.

Notification to use where membership only is to be transferred

What to do

11.31 For transfers of membership only, where the criteria in paragraph 11.30 is satisfied, notifyServices to Pensions Industry as follows:

Step Action

1 fill in form CA1897, ensuring that the pre ‘97 rights indicator is always completed

2 sign and date the form. Send the completed form to Services to Pensions Industry withinfive weeks of the date the employee transferred within the COMB scheme

11.32 On receipt of form CA1897, Services to Pensions Industry will note the relevant National Insurance(NI) accounts to ensure the correct calculations are performed on overall termination of contracted-out employment in the COMB scheme.

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Statements

11.33 The main purpose of form CA1897 is to accurately identify the nature of pre 6 April 1997occupational pension rights, it is not a termination notice and therefore a statement will not be issued.

11.34 If in exceptional circumstances the majority of members are to be transferred from the COSR part of a COMB scheme to the active COMP part of the same COMB scheme the scheme should adviseServices to Pensions Industry in writing. Where appropriate Services to Pensions Industry will provide alisting (CA1898) of all employees, with pre ‘97 rights, recorded as being in contracted-outemployment with the employer(s) participating in the scheme.

11.35 If the employer has more than one scheme, Services to Pensions Industry cannot identify theparticular scheme an individual employee belongs to. It is therefore important that the schemeadministrator identifies the appropriate members of the COSR part of the COMB scheme who are totransfer to the COMP part and completes the CA1898 to show the pre ‘97 rights appropriate to thosemembers who are transferring.

Accrued rights retained in the COMB scheme on termination

What to do

11.36 If an employee’s contracted-out employment in the COSR part of the COMB scheme terminates andthe rights accrued in the COMB scheme (including any protected rights) are to be retained in thescheme, notify Services to Pensions Industry as follows:

Step Action


2 sign and date the form. Send the completed form to Services to Pensions Industry onemonth before the expected date of termination but no later than six months after thedate of termination

Statements

11.37 Services to Pensions Industry will identify any pre ‘97 rights as being either COSR or COMP rights andwhere a GMP forms part of the rights retained in the scheme, a statement, form CA1625 (RD654) willbe issued. The amount quoted does not take account of any pension rights shared on divorce.

Calculation of the GMP

11.38 If a GMP forms part of the rights retained in the scheme, the relevant calculation will only beperformed at the point an employee leaves the COMB scheme overall.

11.39 A GMP calculation will be performed for such rights when the termination notification form CA1886 isprocessed. The Section 148 revaluation order relevant at the date of leaving the COMB scheme overallwill be used in the calculation.

Buying back GMP rights and Post ‘97 COSR Rights into the state scheme

11.40 GMP rights and/or post ‘97 COSR rights accrued in a COMB scheme may be bought back into thestate scheme by payment of a CEP.

11.41 If the conditions set out in Chapter 8 are satisfied, a CEP can be paid for any periods for which COSRrights are held within the scheme, providing that the total period of membership in the scheme (in both the COSR and COMP parts) is less than two years.

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11.42 This will include any period where the employee was a linked member of either a COSR or COMPscheme immediately before the scheme became a COMB scheme.

GMP rights and/or Post ‘97 COSR Rights only have accrued in the COMB scheme

What to do

11.43 Where COSR rights have accrued for the total period of contracted-out employment and the schemehas elected to pay a CEP, notify Services to Pensions Industry:

Step Action


2 sign and date the form. Send the completed form to Services to Pensions Industry onemonth before the expected date of termination but no later than six months after thedate of termination. If the CEP is for a widow or widower, notice must be given within sixmonths after death

GMP and/or Post ‘97 COSR Rights and protected rights have accrued in the COMB scheme

What to do

11.44 If an employee has accrued both COSR rights and protected rights in the COMB scheme and theoverall period of scheme membership is less than two years, a CEP may be paid for any COSR rightsheld in the scheme:

Step Action

1 provide a letter containing the following information:

• confirmation that COSR rights are to be discharged by the payment of a CEP, and

• details of the period of contracted-out employment within the COMB scheme, and

• the earnings relevant to employment in the COSR part of the COMB scheme which are to be used in the CEP calculation

2 fill in form:

• CA1589, if the protected rights are to be retained in the scheme, or

• CA1892, if the protected rights are to be transferred to a COSR, COMP, COMB or APP scheme

3 form CA1589 or CA1892 should show the full period of contracted-out employment inthe COMB scheme and should be attached to the letter containing the CEP details

4 send the completed form and attached letter to Services to Pensions Industry

11.45 If a woman has paid reduced rate contributions for part of the period of contracted-out employment,the letter at step 1 above should show

• only those earnings on which full contracted-out (D rate) National Insurance contributions (NICs)were paid.

11.46 The amount of the premium due can be calculated and sent with the letter, but if in doubt, awaitform CA1620.

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11.47 A CEP of £17 or less for each individual employee is not required to be notified or paid.

11.48 Chapter 8 of this manual provides further details on the calculation and payment of the CEP.

Transfers of rights accrued in a COMB scheme to another COMB, COSR, COMP/COMPSHP orAPP/APPSHP scheme


11.49 The employee’s written consent must normally be obtained before a transfer of accrued rights maytake place.

11.50 The employee’s consent is not required if the conditions set out at paragraph 9.16 are satisfied.

Transfer of rights accrued in a COMB scheme to the active COSR part of another COMB scheme orCOSR scheme






- pensions to be payable at the same rates at which the GMP would have been payable if therehad been no transfer, and


• post ‘97 COSR rights have been transferred. The transfer payment is applied to provide rights for the employee, which had they accrued in the receiving scheme would be equal to those foremployees who are in employment which is contracted-out in relation to the receiving scheme orhave been in contracted-out employment with the receiving scheme.

11.52 The receiving scheme must revalue any GMP rights accrued up to 5 April 1997. There are no InlandRevenue National Insurance Contributions Office restrictions as to whether fixed, limited or Section148 revaluation can be applied, unless

• a transfer has previously taken place, but the rules of the transferring and receiving schemes mayimpose restrictions

• the termination date is on or after 6 April 1997, in which case limited revaluation is no longer anoption. Schemes which previously used limited rate revaluation must use Section 148 orders orfixed rate revaluation.

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11.53 If the person whose pension rights are transferred is not in contracted-out employment covered bythe receiving scheme, the scheme must look after GMP rights accrued up to 5 April 1997 and/or post‘97 COSR rights as if they were

• currently in employment covered by the new scheme, or

• formerly in employment covered by the scheme, if

- it is a Section 53 (formerly contracted-out) Salary Related scheme, and

- the member applied for the transfer before 6 April 1997.

Previous GMP transfer with Section 148 revaluation

11.54 If an external transfer has previously taken place to the COSR part of the COMB scheme with Section148 revaluation and pension rights are transferred again, the periods linked by Section 148 transfersare treated as one. The later transfer can be treated as a first transfer.

Previous GMP transfer with fixed or limited rate revaluation

11.55 If an external transfer of GMP rights has previously taken place with the revaluation at fixed or limitedrate and pension rights are transferred again, the new scheme must

• revalue the previously transferred rights at the same rate, or

• choose to change the rate of revaluation being applied to previously transferred rights from fixedor limited rate to Section 148. The Section 148 rate must be used from the earlier terminationdate. Any Limited Revaluation Premium (LRP) paid is refunded. Schemes wishing to do this mustadvise Services to Pensions Industry in writing.

11.56 There is no need to tell Services to Pensions Industry if an employee moves within six months fromone scheme to another operating under the same Employer’s Contracting-out Number (ECON) if therights accrued in the original scheme are also transferred. If the rights are held in the originalscheme, then that scheme must submit a notice of termination.

Notification to use where the employee is in contracted-out employmentunder the receiving scheme

What to do

11.57 If the employee is taking up employment by reference to the receiving scheme, notifyServices to Pensions Industry:

Step Action

1 fill in CA1887


Statements

11.58 If a GMP is included in the transferred rights, a statement, form CA1625 (RD654) will be sent to thereceiving scheme. The amount quoted does not take account of any pension rights shared on divorce.

11.59 If the COSR pension rights which are transferred are based on service which began on or after 6 April 1997, a statement of transfer of contracted-out liability, form CA1899, will be issued to thereceiving scheme.

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What to do

11.60 If an employee’s GMP rights are transferred to a COSR scheme or active COSR part of a COMBscheme and the employee is not in contracted-out employment under the receiving scheme, notify Services to Pensions Industry as follows:

Step Action

1 fill in form:




11.61 If a notice of termination has already been sent and the rate of revaluation is changed, a revised formCA1889 noted ‘Change of Preservation’ must be sent to Services to Pensions Industry.

Statements

11.62 A statement of transfer of contracted-out liability, form CA1899, will be issued to thereceiving scheme.

Transfer of rights accrued in a COMB scheme to the active COMP part of another COMB scheme orCOMP/COMPSHP scheme






• GMP rights are transferred, the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

11.64 Any fixed or limited rate revaluation applying to any GMP rights before the transfer was made mustbe replaced by Section 148 revaluation to determine at SPA, or death if earlier, the amount to bededucted from AP entitlement, see paragraph 2.12. Any LRP paid will be refunded, seeparagraph 9.28.

11.65 There is no need to tell Services to Pensions Industry if an employee moves within six months fromone scheme to another operating under the same ECON if the rights accrued in the originalscheme are also transferred. If the rights are held in the original scheme, then that scheme mustsubmit a notice of termination.

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What to do

11.66 If a transfer of GMP and/or post ‘97 COSR rights is made to a COMP/COMPSHP scheme or activeCOMP part of a COMB scheme, and the employee is taking up contracted-out employment under thereceiving scheme, notify Services to Pensions Industry:

Step Action



Statements

11.67 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets incentive and/or age-related payment information on a paper schedule. If the receiving scheme gets payment information via magnetic media then confirmation of anyincoming transfer will be included in this information. For further details, see manual CA70 Magnetic Media Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.


What to do

11.68 If a transfer of GMP and/or post ‘97 COSR rights is made to a COMP/COMPSHP scheme or activeCOMP part of a COMB scheme and the employee is not in contracted-out employment under thereceiving scheme, notify Services to Pensions Industry:

Step Action

1 fill in form:




Statements

11.69 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets incentive and/or age-related payment information on a paper schedule. If the receiving scheme gets payment information via magnetic media then confirmation of anyincoming transfer will be included in this information. For further details, see manual CA70 Magnetic Media Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.

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Transfer of rights accrued in a COMB scheme to an APP/APPSHP scheme

11.70 A transfer payment for rights accrued in the COMB scheme may be made to an APP/APPSHP scheme, if



• where GMP rights are transferred, the transfer payment is of an amount at least equal to the cashequivalent of the employee’s accrued rights to GMP.

11.71 Any fixed or limited rate revaluation applying to any GMP rights before the transfer was made, mustbe replaced by Section 148 revaluation to determine at SPA, or death if earlier, the amount to bededucted from state AP entitlement, see paragraph 2.12. Any LRP paid will be refunded, seeparagraph 9.28.

Notification to use if the employee is currently contributing to that APP/APPSHP scheme

What to do

11.72 If a transfer that includes GMP rights and/or post ‘97 COSR rights is made to an APP/APPSHPscheme and the employee is currently contributing to the APP/APPSHP scheme, notifyServices to Pensions Industry:

Step Action



Statements

11.73 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets minimum contributions (MCs) payment information on a paper schedule. If thereceiving scheme gets MCs payment information via magnetic media then confirmation of anyincoming transfers will be included in this information. For further details, see manual CA70 Magnetic Media Transmission of Data to Appropriate Personal Pension, Contracted-out Occupational Schemes andContracted-out Stakeholder Pension Schemes.

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Notification to use if the employee is not contributing to that APP/APPSHP scheme

What to do

11.74 If the employee is not contributing to the APP/APPSHP scheme, notify Services to Pensions Industry:

Step Action

1 fill in form:




Statements

11.75 A statement of transfer of protected rights liability, form CA1882, will be issued to any receivingscheme that gets MCs payment information on a paper schedule. If the receiving scheme gets MCspayment information via magnetic media then confirmation of any incoming transfers will be includedin this information. For further details, see manual CA70 Magnetic Media Transmission of Data toAppropriate Personal Pension, Contracted-out Occupational Schemes and Contracted-out StakeholderPension Schemes.

Transfer from an active COSR part of a COMB scheme to an overseas occupational pension scheme,other than one which is or was contracted-out and still under the financial supervision ofServices to Pensions Industry

11.76 GMP rights, post ‘97 COSR rights and protected rights can be transferred to an overseas occupationalpension scheme.

11.77 Post ‘97 COSR rights and from 6 April 2002, protected rights can be transferred to anoverseas arrangement

11.78 For details about a transfer to an overseas occupational pension scheme or overseas arrangement andthe relevant notification to be sent to Services to Pensions Industry, see paragraphs 9.52 to 9.60.

Buying-out a GMP and/or Post ‘97 COSR Rights

11.79 The rights accrued in the COSR part of a COMB scheme may be bought-out by an insurancecompany, as detailed in Chapter 10.

Splitting the rights accrued in a COMB scheme

11.80 The rights accrued in a COMB scheme may be split as detailed in paragraphs 9.63 to 9.70.

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Providing a pension at retirement or death

General

12.1 Schemes must use a member’s scheme benefits, including any Guaranteed Minimum Pension (GMP)and/or post ‘97 Contracted-out Salary Related (COSR) rights to

• provide a pension from the scheme, or

• purchase a pension (annuity) from an insurance company or friendly society, or

• in certain circumstances, commute the pension on the grounds of triviality.

12.2 These options can be taken

• by the member, or

• by the member’s widow or widower.

Effect on state Retirement Pension

12.3 Information about how membership of a COSR scheme affects entitlement to state RetirementPension is given in Appendix 5.

Providing a pension

12.4 The scheme must use a member’s scheme benefits, including any GMP and/or post ‘97 COSR rights,to provide a pension

• for the member, or

• for their widow or widower on death, providing certain conditions are met, see paragraphs 12.22to 12.24.

12.5 This pension can be payable:

• at any time for the member subject to scheme rules, or

• to the widow or widower on the death of the member.

12.6 However, the scheme must make the GMP available to its members at age

• 65 for a man

• 60 for a woman.

12.7 Although the State Pension Age (SPA) for women will rise from age 60 to 65 over a phased period often years starting from April 2010, the date the GMP must be made available remains at age 60.

12.8 There is no requirement for the scheme to notify Services to Pensions Industry that they have put thepension into payment, except if the scheme member

• is currently employed but terminates the employment because the pension is put into paymentbefore SPA, or

• defers take up of the pension beyond SPA and there is liability to pay a GMP.

12

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Payment of the GMP is deferred

12.9 If employment continues, payment of a scheme pension (including the GMP element) may bedeferred after SPA. However, the member must consent to deferment of the GMP if the

• GMP relates to a different employment to that in which they are currently employed, or

• deferment includes a period which is five years after they reached SPA.

12.10 If the deferment is for seven weeks or more, the scheme must increase the GMP by 1/7% for eachcomplete week in the period of deferment. The increment calculation is based on the pension value at the end of the period of deferment which will include any inflation proofing, see Appendix 4,Example 7.

12.11 If a member dies while deferring their pension, any increments due should be calculated up to thedate of death. The member’s spouse will then be entitled to half the increments earned on the GMP

• built up from 6 April 1978 in the case of a qualifying widow, or

• built up from 6 April 1988 in the case of a qualifying widower.

See paragraphs 12.22 and 12.23 for qualifying conditions.

12.12 If the period of contracted-out employment includes any period up to and including 5 April1997, ie there is a GMP, the scheme must tell Services to Pensions Industry

• the value of the increments due and

• the date they will be paid.

What to do

12.13 The COSR scheme or the COSR part of a Contracted-out Mixed Benefit (COMB) scheme must:

Step Action

1 fill in form CA1597 (RD574), showing the date on which the GMP became payable andthe incremental calculation based on that GMP. In the case of widows or widowers, thedate the GMP amount is due must be the date of death

2 send the completed form to Services to Pensions Industry as soon as the pension hasbeen put into payment

Trivial Commutation

12.14 Any GMP and/or post ‘97 COSR rights can be commuted into a lump sum if the followingcircumstances apply:

Conditions

12.15 Commutation of the GMP is available for

• the member when they reach SPA, or

• the widow or widower provided that the conditions at paragraph 12.22 or 12.23 are satisfied,and where

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- the aggregate value of all pension benefits, including GMP and post ‘97 COSR rights,under all schemes relating to employment with the same employer, does not exceed£260 a year, and

- such a benefit is payable under the scheme rules, and

- the Commissioners of Inland Revenue are satisfied that the scheme’s method of calculating the lump sum is reasonable.

12.16 Commutation of the post ‘97 COSR rights is available for

• the member when they reach the age of retirement, subject to the scheme rules (it must be thesame age for both men and women), or

• their widow/widower, provided that the conditions at paragraph 12.24 are satisfied,and where

- the aggregate value of all pension benefits, including GMP and post ‘97 COSR rights,under all schemes relating to employment with the same employer, does not exceed £260 a year, and

- such a benefit is payable under the scheme rules, and

- the Commissioners of Inland Revenue are satisfied that the scheme’s method of calculating the lump sum is reasonable.

What to do

12.17 The scheme is only obliged to notify Services to Pensions Industry that the GMP has been commutedif the scheme ceases to contract-out. For further information, see manual CA15 Cessation ofContracted-out Pension Schemes.

Inflation-proofing the pension

12.18 Any GMP accrued between 6 April 1988 and 5 April 1997 must be inflation-proofed by the scheme bythe lower of

• the increase in prices over a 12 month period, or

• 3%.

12.19 The first such increase will be due on 6 April following the date on which the GMP becomes payable,with subsequent increases being made on 6 April. Any other increases a scheme makes during a yearmay be taken into account against the inflation proofing required at the beginning of the new taxyear. Schemes will not be permitted to pay such increases out of other benefits in the scheme whichare in excess of the GMP. Any balance of inflation proofing above 3% is provided via the StateAdditional Pension. See Appendix 4, example 6.

12.20 Pension rights that accrue from 6 April 1997 onwards must be inflation-proofed by the scheme by thelower of


• 5%.

12.21 Widows’ and widowers’ benefits are protected in the same way.

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Widow and widower inheritance provisions

Widow’s GMP

12.22 If a married man dies with an entitlement to a GMP, his widow is entitled to half the GMP accrued by, or in payment to him, at the date of his death providing she qualifies for one of the following state benefits:

• Bereavement Allowance

• Widowed Parent’s Allowance

• Retirement Pension, based on her late husband’s National Insurance contributions (NICs)

• Retirement Pension, based on her own NICs but with underlying title to a Retirement Pension onher late husband’s NICs.

Widower’s GMP

12.23 If a married woman dies on or after 6 April 1989 with an entitlement to a GMP, her widower isentitled to half of her GMP built up from 6 April 1988, if he qualifies for one of the followingstate benefits

• Bereavement Allowance

• Widowed Parent’s Allowance

- Retirement Pension, based on his late wife’s National Insurance contributions (NICs)

- Retirement Pension, based on his own NICs but with underlying title to a Retirement Pension on his late wife’s NICs

12.24 Once entitlement to Widowed Parent’s Allowance or Bereavement Allowance ends, if the widow orwidower has reached age 45, the widows or widowers pension continues to be payable. The schemecan withdraw payment if the widow or widower subsequently remarries or lives together with anotherperson as husband and wife.

Post ‘97 COSR Rights for widows and widowers

12.25 For the widow or widower to inherit survivor’s benefits provided under the scheme rules, they must

• be married to the deceased member before the pension commenced payment, and

• not be living with another person as husband and wife at the time of the spouse’s death.

12.26 The scheme can, if they wish, withdraw payment of the widow or widower’s pension if the widow orwidower subsequently

• remarries, or

• lives together with another person as husband and wife.

12.27 If a widow or widower does not satisfy the qualifying conditions set out above, then it will depend onthe scheme rules whether he/she will be entitled to a pension.

12.28 The employer/scheme must submit the relevant notification to Services to Pensions Industry if

• it has been established that a GMP is to be paid to the qualifying widow or widower, and

• the member

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- died in service, or

- the member had left the scheme before the date of death but no termination notice had been submitted.

12.29 There is no requirement to submit a termination notice if the period of service is entirely post 5 April 1997.

12.30 The scheme can discharge their liability to pay a pension by the payment of a ContributionsEquivalent Premium (CEP), if the member

• dies in service, and

• has less than two years qualifying service, and

• a qualifying widow(er) exists.

See Chapter 8 for more information.

Statements

12.31 Details of all statements issued to the scheme, member, widow and widower are shown at Chapter 13and in Appendix 2.

Statements

Guaranteed Minimum Pension (GMP) statements

13.1 GMP statements are issued to Contracted-out Salary Related (COSR) and Contracted-out MixedBenefit (COMB) schemes for periods of contracted-out employment for which a GMP has accrued.

13.2 Inland Revenue National Insurance Contributions Office issue statements when notification is receivedthat an employee has

• left contracted-out employment before State Pension Age (SPA)

• reached SPA, or

• died, leaving a widow or widower.

13.3 If further information is received which alters any GMP, a further statement is issued. Statements aredated and supersede any previously issued.

13.4 Any date from which a GMP is payable is based on the employee’s date of birth as recorded by the Inland Revenue National Insurance Contributions Office. If the date of birth is disputed, notifyServices to Pensions Industry.

13

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Employee leaves contracted-out employment before SPA

GMP statement CA1625

13.5 CA1625 is sent to the scheme or other body responsible for payment showing

• the GMP amount. The amount quoted does not take account of any pension rights shared ondivorce.

• any post 5 April 1988 GMP amount, and

• the rate of revaluation.

13.6 If contributions have been paid at both the reduced (E) rate and full (D) rate during the period ofemployment, the statement will show

• the full period of employment, but

• a GMP based on the full rate contracted-out contributions only.

13.7 If there are periods of employment linked by transfers and the revaluation rates used are different,statement CA1625 will show

• the overall GMP amount

• any overall post 5 April 1988 GMP amount

• the component GMP amounts

• any post 5 April 1988 GMP component amounts, and

• the rate of revaluation used in the calculation for each component.

Note: The GMP amounts quoted will not take account of any pension rights shared on divorce.

13.8 Each GMP amount is revalued up to and including the tax year in which service under the latestscheme ended.

13.9 If an employee leaves contracted-out employment before SPA, the GMP is revalued by the scheme’schosen rate(s) of revaluation.

13.10 When calculating a GMP, amounts are rounded to the nearest 1p for each component, 0.5p isrounded up.

Statements issued when employee, or former employee, reaches SPA

13.11 When at SPA an employee has accrued any GMP, post ‘97 COSR rights or protected rights, thefollowing statements are issued:

• CA1627 to the employee, showing

- the weekly GMP/Contracted-out Deduction (COD), if appropriate. The GMP amount quoted will not take account of any pension rights shared on divorce.

- the name and address of the scheme

• CA1629 to the scheme, showing

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- the name and address of the employee

- the date according to Inland Revenue National Insurance Contributions Office records from which the GMP is payable, if appropriate

- the total revalued GMP, if appropriate

- a breakdown of the total GMP, if appropriate

• the amount quoted does not take account of any pension rights shared on divorce.

13.12 A breakdown of the total GMP shows

• for a single period of employment

- the early leaver GMP

- the revalued GMP

- any post 5 April 1988 GMP amounts

• for several periods of employment linked by transfers:

- the early leaver GMP for each period of employment

- the revalued GMP for each period of employment

- any post 5 April 1988 GMP amounts.

13.13 If an employee has continued in contracted-out employment up to SPA, any GMP/COD is calculatedusing Section 148 orders.

13.14 Schemes must inflation-proof GMPs/CODs built up from 6 April 1988, see paragraph 12.18.

Widow’s entitlement

13.15 Where a married man dies and his widow is entitled to half of any GMP or post ‘97 COSR rights builtup, or in payment to him, at the date of death and a claim to state Bereavement Benefit is being dealtwith, the following statements are issued:

• CA1626 to the widow showing

- the weekly GMP/COD, if appropriate. The GMP amount quoted will not take account of any pension rights shared on divorce.

- the name and address of the scheme

• CA1633 to the scheme showing

- identity details of the late husband and widow

- the widow’s address

- the late husband’s date of death

- the weekly widow’s GMP, if appropriate

- a breakdown of the widow’s GMP, if appropriate

- the GMP amounts quoted will not take account of any pension rights shared on divorce.

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13.16 If state benefit is not payable, a further notification is sent to the scheme advising that there is noliability. If at a later date, the state benefit ceases to be payable, a notification is not sent.

13.17 From 6 April 1997 two new statements will be issued by Services to Pensions Industry. These are:

CA1931 - Statement of possible pension liability for a widow

13.18 CA1931 will be issued to the scheme when a man dies with post ‘97 COSR rights and a claim tobereavement benefit has not been made.

CA1932 - Statement of possible pension liability for a widow

13.19 CA1932 will be issued to the employer with statement CA1931 when the scheme name and addresscannot be retrieved from the records held by Inland Revenue National Insurance Contributions Office.

13.20 Schemes must inflation-proof widow’s GMPs/CODs built up from 6 April 1988, see paragraph 12.18.

CA1932 - Notice of possible widows protected rights liability

13.21 CA1702 will be issued to a COMP/COMPSHP and APP/APPSHP schemes when a man with protectedrights dies on or after 6 April 2002 and a claim to bereavement benefit has not been made.

Widower’s entitlement

13.22 The following statements are used to notify schemes of possible/actual liability:

• CA1702 When there may be a widower or where the date is before 6 April 2002 a qualifyingwidower with protected rights liability. The statement will show

- the details of the deceased member

- the period of contracted-out employment

• CA1635 When there may be a qualifying widower with any GMP and/or post ‘97 COSR rights.The statement will show

- the details of the deceased scheme member including the date of death


- the amount of GMP which would be payable, if appropriate. The amount quoted does not take account of any pension rights shared on divorce.

• CA1636. When the scheme has identified that a qualifying widower exists and has returned thetear-off portion of the statement CA1635 indicating that they wish to be informed of any changeto the GMP. The statement will show

- the details of the deceased scheme member including the date of death


- the revised amount of widower’s GMP. The amount quoted does not take account of any pension rights shared on divorce.

• CA1637. When there is a qualifying widower with GMP and/or post ‘97 COSR rights. Thestatement will show

99

- the identity details of the scheme member and widower

- the widower’s address


- the amount of widower’s GMP, if appropriate. The amount quoted does not take account of any pension rights shared on divorce.

13.23 CA1641 is sent to qualifying widowers where the widower and his late wife were both over SPAwhen she died and the widower inherits additional pension based on his late wife’s National Insurancecontributions (NICs). The statement will show

• the weekly GMP/COD, if appropriate. The amount quoted does not take account of any pensionrights shared on divorce

• the name and address of the scheme.

Protected rights statements/notices

CA1883 - Statement of pension liability

13.24 When the member or their widow(er) gives effect to the protected rights by provision of a pension,statement CA1883 will be issued to the scheme responsible for the payment of the pension. This can be

• a Contracted-out Money Purchase (COMP)/Contracted-out Money Purchase Stakeholder Pension(COMPSHP) scheme

• a COMB scheme

• an Appropriate Personal Pension (APP)/Appropriate Personal Pension Stakeholder Pension(APPSHP) scheme

• an insurance company, or

• a friendly society.

CA1884 - Statement where pension rights are commuted

13.25 CA1884 will be issued to the member, widow or widower when the protected rights have beencommuted on the grounds of triviality.

CA1885 - Notice advising effect has not been given to the protected rights

13.26 CA1885 will be issued to the scheme where effect has not been given to the protected rights and themember has

• reached SPA

• reached age 75, or

• died.

Buy-out of a GMP

13.27 CA1623 will be issued to the receiving scheme whenever a member’s GMP rights are bought out byan insurance company. The statement will show the same information as that for form CA1625 asdetailed at paragraph 13.5.

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Transfer statements

13.28 From 6 April 1997 two new statements will be issued by Services to Pensions Industry and aredesigned to help receiving schemes track and take account of transferred-in benefits.

13.29 The statements will show the following:

• exporting scheme’s details

• scheme member’s details

• period of contracted-out employment

• receiving Employer’s Contracting-out Number (ECON) (if any)

• receiving Scheme Contracted-out Number (SCON) or Appropriate Scheme Number (ASCN)

• date of birth

• a microfilm number which should be quoted on any correspondence withServices to Pensions Industry.

CA1899 - Statement of transfer of contracted-out pension liability

13.30 From 6 April 1997 CA1899 will be issued to the receiving scheme for periods of employment that arebefore and span 6 April 1997, where

• there has been a change of Responsible Paying Authority (RPA), and

• the receiving scheme is a COSR or COSR part of a COMB scheme.

13.31 CA1899 will be issued to the receiving scheme, for periods of employment that are entirely post 6 April 1997, where there

• has been a transfer and the receiving scheme is a COSR or COSR part of a COMB scheme, or

• is a buy-out to an insurance company, or

• has been a change of RPA and the receiving scheme is a COSR or COSR part of a COMB scheme.

CA1882 - Statement of transfer of protected rights liability

13.32 CA1882 will be issued to the receiving scheme when there has been a

• transfer to a COMP/COMPSHP scheme or COMP part of a COMB scheme or APP/APPSHPscheme, or

• change of RPA and the new paying authority is a COMP/COMPSHP or COMP part of a COMBscheme or an APP/APPSHP scheme.

13.33 When the receiving scheme is

• an APP/APPSHP scheme which gets payment information via magnetic media, or

• a COMP/COMPSHP scheme or COMP part of a COMB scheme which gets incentive and/or age-related payments information via magnetic media

then confirmation of any incoming transfer will be included in this information. For furtherinformation, see manual CA70 Magnetic Media Transmission of Data to Appropriate Personal Pension,and Contracted-out Occupational Schemes and Contracted-out Stakeholder Pension Schemes.

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The Dual Guaranteed Minimum Pension (GMP) Calculation Facility

Background

14.1 In 1990, in the case of Barber v Guardian Royal Exchange, the European Court of Justice (ECJ) ruledthat occupational pension schemes must provide equal treatment for men and women in the overallpension paid to members for pensionable service from 17 May 1990.

14.2 The Government has legislated in the Pensions Act 1995

• to bring domestic law into line with European Community (EC) legislation following the Barbercase and more recent rulings from the ECJ

• to break the links between the State Additional Pension and contracted-out employment.

14.3 This means that GMPs will cease to accrue from 6 April 1997, making it easier for pension schemes toachieve equal treatment for the future.

14.4 Occupational pension schemes will still be required to equalise occupational pensions accruedbetween 17 May 1990 and 5 April 1997 at the more favourable rate. In order to do so, schemes mayneed to carry out dual calculations for GMPs accrued during this period, ie the GMP calculated atboth the male and female accrual rate.

14.5 To assist schemes with this process, the Dual GMP Calculation Facility provided by Services to PensionsIndustry will give the GMP calculations at both the male and female accrual rate for individualmembers of a contracted-out pension scheme for any period(s) between 6 April 1990 and 5 April1997. The amount quoted does not take account of any pension rights shared on divorce.

14.6 The GMP calculated using the member’s true sex will be the amount deducted from any StateAdditional Pension entitlement.

How the facility works

14.7 Dual GMP calculations can be obtained by using either

• the Individual GMP Enquiry Service, see paragraphs 1.22 to 1.29. If you wish to submit requestsvia magnetic media, see manual CA22 Submitting Contracted-out Data Transactions usingMagnetic Media, or

• the Accrued GMP Liability Service (AGLS), see paragraphs 1.30 to 1.34. If you wish to submitrequests via the AGLS you should refer to manual CA19 Using the Accrued GMP Liability Service.

Requesting dual GMP calculations using the Individual GMP Enquiry Service

14.8 Form CA1604 has been amended to include a box to request dual GMP calculations. As with theexisting Individual GMP Calculation Service, the dual GMP calculations will be provided free of charge.

14.9 Supplies of the new form can be obtained from Services to Pensions Industry in the usual way,see Appendix 1.

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The information you will receive

14.10 If dual GMP calculations are requested using the Individual GMP Enquiry Service, you will still receiveform CA1856 advising the GMP amount

• based on the true sex, and

• covering the full period of contracted-out employment up to 5 April 1997, if appropriate.

14.11 You will also receive form CA1783, giving the following dual GMP calculations:

• a GMP amount based on

- the true sex, and

- the period 6 April 1990 or commencement tax year, if later, up to and including 5 April 1997, if appropriate, and

• a GMP amount based on

- the opposite sex, and

- the period 6 April 1990 or commencement tax year, if later, up to and including 5 April 1997, if appropriate.

14.12 If an opposite sex calculation is being performed for a woman, any contracted-out earnings in her60th birthday tax year final relevant year (FRY) +1 will be used in the calculation. This information will be taken from the individual’s National Insurance record and should not be entered in thepenultimate or final year earnings boxes on form CA1604.

14.13 For dual GMP calculation purposes, we have assumed the woman’s GMP has been in payment sinceState Additional Pension, therefore, GMP increments have not accrued.

14.14 Examples of the new calculations are shown at Appendix 6.

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Pension Sharing on Divorce

Background

15.1 Pension scheme rights can be an important part of the assets which need to be considered when amarriage ends. From 1 December 2000 legislation came into force which allows divorcing couples theoption to share their pension assets as part of the overall divorce settlement. Apart from the basicstate Retirement Pension and survivor’s pensions, which will not be shareable, it will be possible toshare most types of occupational and personal pensions including that available through theadditional state pension, commonly known as the State Earnings Related Pension Scheme (SERPS),or State Second Pension.

15.2 Pension sharing is available alongside existing methods of dealing with pension rights on divorce:offsetting and earmarking. The new measure will help to provide the courts with a comprehensiverange of options with dealing with pensions at the time of divorce. Pension sharing will

• provide greater flexibility and choice for divorcing couples and the courts

• allow pension rights to be treated in a way which provides for the fairest overall settlement ofassets in each divorce case, and

• increase the opportunity for divorcing couples to achieve complete financial independencethrough a “clean break” settlement.

15.3 Pension sharing on divorce was introduced as part of the Welfare Reform and Pensions Act 1999.Pension sharing is available in all divorce and nullity proceedings which begin on or after 1 December2000. After this date it is possible for a court to issue a pension share order or agreement to thepension scheme provider as part of the divorce settlement.

15.4 Once a couple decide to go ahead with divorce proceedings a court can order that pension sharingis to apply. The court (or for divorces obtained in Scotland, the party who will benefit from thepension sharing) will issue copies of the pension sharing order or agreement to the pension schemeor provider.

Safeguarded Rights

15.5 Rights of a scheme member derived from the membership of a contracted-out occupational pensionscheme which are transferred to the former spouse on divorce are known as “safeguarded rights” andtherefore will be distinguished from the contracted-out rights built up by a member of a contracted-out occupational pension scheme.

15.6 Scheme rules can specify whether all of the accrued rights that are subject to a pension share becomesafeguarded rights, therefore safeguarded rights may include some non contracted-out rights. Inaddition, the safeguarded rights might include safeguarded rights from a previous divorce.

15.7 The requirements for safeguarded rights broadly reflect those for contracted-out rights. In particularthe government wish to ensure that safeguarded rights (which are wholly or in part financed byrebates of National Insurance contributions (NICs)) are securely protected and used for the purposefor which they are intended - to provide an income in retirement.

15.8 Safeguarded rights will not be tracked or monitored by the department. It is important, therefore, thatschemes maintain accurate records when a former spouse’s rights are preserved in the scheme,transferred or bought out through an insurance policy. Schemes should also keep details of thepension share order, as they will need to record the percentage of the share on the member’spension account.

15

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15.9 The “safeguarded” rights will be ringfenced and will be subject to the same conditions that apply topost - 1997 salary related Contracted-out rights or protected rights. But note that schemes will not berequired to provide survivors’ benefits from the safeguarded rights nor will we track or monitor them.

15.10 A pension or annuity in respect of safeguarded rights is normally required to start being paid betweenthe ages of 60 and 65, unless early payment is appropriate, for example, because of ill health, or theformer spouse has agreed to payment on a date later than their 65th birthday up to age 75.

15.11 Schemes that opt to hold safeguarded rights after having elected to contract-out will not be requiredto advise Services to Pensions Industry that they intend to start holding safeguarded rights. If required,schemes will need to confirm that they meet the safeguarded rights requirements.

Calculation Services

15.12 Occupational pension schemes will be required to provide a valuation of accrued pension rights toenable the courts to decide on the fairest overall settlement of assets.

15.13 To assist schemes with this process, the calculation services currently available can be used to requesta Contracted-out Deduction (COD)/Guaranteed Minimum Pension (GMP) calculation at any timeduring the Pension Sharing on Divorce procedures.

15.14 As with the existing Individual COD/GMP Calculation Service, calculations for pension sharing caseswill be provided free of charge.

Pension Sharing on Divorce Notification

15.15 Where pension rights have been shared, the courts, (or in Scotland, the party who will benefitfrom the pension sharing) will formally notify the scheme which will in turn be required to notifyServices to Pensions Industry. Schemes will have 4 months to implement the pension share order.

15.16 A new form CA2202 Pension Sharing on Divorce Notification, has been introduced for administratorsto fill in and notify Services to Pensions Industry of the pension share. This should be submitted toServices to Pensions Industry following the implementation of the pension sharing order, but not laterthan six months following the date of termination of contracted-out employment.

15.17 In respect of couples obtaining a divorce in Scotland, a monetary value or percentage rate will beawarded to the former spouse, however, the scheme will be required to notify Services to PensionsIndustry as a percentage.

15.18 On receipt of the notification Services to Pensions Industry will update the National Insurance (NI)records of both the member and the former spouse to show that a “Pension Share” has occurred.

15.19 Details from form CA2202 will be held on a stand-alone computer system, which in turn, may beinterrogated to answer any specific enquiries about the pension share itself. Information from thedatabase can be provided on request.

Contracted-out Deduction

15.20 When a member’s pension rights are shared with a former spouse, a full COD will always be deductedfrom the member’s pre 1997 Additional Pension (AP). The COD will not be reduced to take accountof any contracted-out rights that are subject to a pension sharing order/agreement.

Statement of GMP liability

15.21 The calculation of contracted-out pension rights does not take account of any pension rights sharedon divorce, therefore, the full GMP amount will continue to be notified. All statements (except thoseissued by magnetic media) which show a GMP amount will include the notation “The amount quoteddoes not take account of any pension rights shared on divorce”.

Appendix 1 - Contracted-out Salary Related (COSR) forms

You can either use these forms or make up your own forms. If you produce your own forms, theformat must be approved by Services to Pensions Industry. To obtain the guidelines for producingyour own forms and to obtain approval, contact Services to Pensions Industry/Data Input Section.

To obtain copies of these forms, send a letter or form CA1586 to


These forms are not available from Social Security offices or the Occupational Pensions RegulatoryAuthority (OPRA).

Form Description

CA1586 Forms order form

CA1596 Application for an extension of the time limits for notifying a termination of Contracted-out employment, for making an election to pay a Contributions EquivalentPremium (CEP), Transfer Premium (TP) or for payment of a premium

CA1597 Increments on Guaranteed Minimum Pension (GMP)

CA1598 Schedule listing payments due for State Scheme Premium (SSP)

CA1599 Transfer of accrued pension rights, including GMP rights to be revalued at a fixed rate to a COSR scheme or the active COSR part of a Contracted-out Mixed Benefit(COMB) scheme

To be used to notify periods of contracted-out employment entirely before 6 April 1997

CA1600 Transfer of accrued pension rights, including GMP rights to be revalued at 5% withpayment of a Limited Revaluation Premium (LRP)


CA1601 Transfer from a COSR scheme to a Contracted-out Money Purchase (COMP)/Contracted-out Money Purchase Stakeholder Pension (COMPSHP) scheme or the active COMP partof a COMB scheme


CA1602 Transfer from a COSR scheme to an Appropriate Personal Pension (APP)/AppropriatePersonal pension Stakeholder Pension (APPSHP) scheme if the employee is contributing tothe APP/APPSHP scheme


continued

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Form Description

CA1603 TP notifies termination of employment and buys back the GMP rights back into the state scheme

To be used when the date of election to transfer is before 6 April 1997

CA1604 Request for calculation

CA1607 Notification of split GMP for pre and post 6 April 1988 periods

CA1609 Recommencement of employment under a different employer using the same scheme

CA1610 Buy-out of a GMP and/or post ‘97 COSR rights through an insurance company where anotice of termination has previously been issued to Services to Pensions Industry

CA1611 CEP

CA1612 GMP to be revalued at 5% compound per annum with payment of a LRP


CA1614 Cessation of Class 1 National Insurance contributions (NICs) while abroad

CA1615 GMP to be revalued at a fixed rate revaluation


CA1616 GMP with full revaluation using Section 148 orders


CA1617 Transfer of accrued pension rights, to a COSR scheme or active COSR part of a COMBscheme including GMP rights to be revalued at section 148 rate


CA1886 Preservation notice

To be used to notify periods of contracted-out employment which either begins beforeand terminates after 6 April 1997 or is entirely after 5 April 1997 and any GMPelement is to be revalued by fixed rate or Section 148 orders

CA1887 Transfer to

• another COSR scheme


• an APP/APPSHP scheme

• the active COSR or COMP part of a COMB scheme

To be used to notify periods of contracted-out employment which either begins beforeand terminates after 6 April 1997 or is entirely after 5 April 1997, and the onwardrevaluation of any GMP is at fixed rate or Section 148 orders

continued

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Form Description

CA1888 Change of Responsible Paying Authority (RPA) to





CA1889 Termination and change of RPA to





CA1890 Transfer of COSR pension rights to an overseas scheme

CA1891 Termination and buy-out of a GMP and/or post ‘97 COSR rights through an insurance company

CA2202 Notification of Pension Sharing on Divorce

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Appendix 2 - Statements/notifications issued

Statement/notice Description

CA1546 (APP8) Letter issued to scheme asking them to obtain earnings information for a member who has died, or for a member who has attained State Pension Age(SPA) prior to 6 April 1998

CA1623 Statement issued to a receiving insurance company after a buy-out hastaken place

CA1625 Statement issued to a Contracted-out Salary Related (COSR) scheme or theactive COSR part of a Contracted-out Mixed Benefit (COMB) scheme wherethere is Guaranteed Minimum Pension (GMP) liability

CA1626 Statement of pension entitlement issued to a widow when the late husbandwas contracted-out of the additional state pension, commonly known asState Earnings Related Pension Scheme (SERPS) or State Second Pension anda claim to Widow’s Benefit has been processed

CA1627 Statement of pension entitlement issued to an individual who wasContracted-out of the additional state pension commonly known as SERPS orState Second Pension when a claim to State Retirement Pension has beenprocessed

CA1629 Statement of pension liability issued to the scheme when a claim to StateRetirement Pension has been processed

CA1633 Statement of pension liability issued to the scheme when a man dies and aclaim to Widow’s Benefit has been made

CA1635 Statement of possible pension liability issued to a COSR scheme, or COSRpart of a COMB scheme, when a female member dies on/after 6 April 1989

CA1636 Statement of pension liability issued to a COSR scheme, or COSR part of aCOMB scheme, upon request if a GMP value changes when a femalemember dies on/after 6 April 1989

CA1637 Statement of actual widower’s pension liability issued to a COSR scheme,or COSR part of a COMB scheme when a female member dies on/after 6 April 1989

CA1641 Statement of pension entitlement issued to a widower when there may beentitlement to receive a widower’s pension from their late wife’s occupationalpension or Appropriate Personal Pension (APP)/Appropriate Personal PensionStakeholder Pension (APPSHP) scheme

CA1702 Notice of possible widows or widower’s protected rights liability issued to aContracted-out Money Purchase (COMP)/Contracted-out Money PurchaseStakeholder Pension (COMPSHP) or APP/APPSHP scheme when a no claim tobereavement Benefit is recorded

CA1882 Statement of protected rights liability issued to the receiving COMP/COMPSHP scheme, or the receiving active COMP part of a COMB scheme,or an APP/APPSHP scheme, when protected rights are transferred

CA1883 Statement of pension liability issued to the receiving scheme when a pensionhas been provided by the COMP/COMPSHP scheme, or the active COMP part of a COMB scheme, or an insurance company or friendly society

continued

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Statement/notice Description

CA1884 Statement issued to the member, widow or widower when the protected rightshave been commuted on the grounds of triviality

CA1885 Notice issued to the scheme advising that the member has

• reached SPA, or

• reached age 75, or

• died

and Services to Pensions Industry has not been notified as to how the protectedrights have been used

CA1899 Statement of transfer of contracted-out pension liability issued to the receivingCOSR scheme, or the receiving active COSR part of a COMB scheme whenprotected rights are transferred

CA1931 Notice of possible pension liability issued to the scheme when a man dies with post ‘97 COSR rights and a claim to Widow’s Benefit has not been made

CA1932 Covering letter issued to the employer with notice CA1931 or CA1635 when thescheme name and address cannot be retrieved from the records held by InlandRevenue National Insurance Contributions Office

Appendix 3 - Tables

List of Tables

Table 1 Revaluation factors

Table 2 Composite divisors for tax years up to and including 1987/88

Table 3 Composite divisors for tax years from 1988/89

Example 1 Transfer Premium (TP) calculation

Table 4 TP - event before 6 April 1988 - no Limited Revaluation Premium (LRP) paid

Table 5 TP - event before 6 April 1988 - LRP paid

Table 6 TP - event between 6 April 1988 and 5 April 1993 - no LRP paid

Table 7 TP - event between 6 April 1988 and 5 April 1993 - LRP paid

Table 8 TP - event after 5 April 1993 - no LRP paid

Table 9 TP - event after 5 April 1993 - LRP paid

Example 2 LRP calculation

Table 10 LRP paid - event before 6 April 1988

Table 11 LRP paid - event between 6 April 1988 and 5 April 1993

Table 12 LRP paid - event after 5 April 1993

‘Event’ means

• for TP, the date of election to pay the TP

• for LRPs, the date of termination of contracted-out employment.

An example of a TP calculation and an LRP calculation is included before each set of tables

111

Table 1 - Revaluation factors

Use this table to revalue earnings factors for calculating the Guaranteed Minimum Pension (GMP):

Order made:

112

4/79 1133

4/80 1356 1197

4/81 1619 1429 1194

4/82 1783 1573 1315 1101

4/83 1920 1694 1416 1185 1107

4/84 2074 1830 1529 1280 1163 1080

4/85 2210 1950 1629 1364 1239 1151 1066

4/86 2407 2123 1774 1485 1350 1253 1161 1089

4/87 2586 2281 1906 1596 1450 1347 1247 1170 1074

4/88 2812 2481 2073 1736 1577 1464 1356 1272 1168 1087

4/89 3115 2749 2297 1923 1747 1623 1502 1410 1294 1205 1108

4/90 3334 2940 2458 2061 1870 1734 1605 1506 1383 1289 1184 1073

4/91 3671 3238 2706 2269 2059 1909 1767 1658 1523 1419 1304 1182 1101

4/92 3910 3448 2882 2416 2193 2033 1882 1766 1622 1511 1389 1258 1173 1065

4/93 4104 3620 3025 2537 2302 2134 1976 1854 1703 1586 1458 1321 1231 1118 1050

4/94 4231 3731 3119 2615 2373 2200 2037 1911 1756 1635 1503 1362 1269 1153 1083 1031

4/95 4419 3897 3257 2731 2479 2298 2127 1996 1834 1708 1570 1422 1325 1204 1131 1077 1044

4/96 4544 4007 3350 2809 2549 2363 2187 2052 1885 1756 1614 1462 1363 1238 1163 1108 1074 1028

4/97 4770 4207 3516 2948 2676 2480 2296 2155 1979 1844 1695 1535 1431 1300 1221 1163 1127 1080 1050

4/98 4990 4400 3678 3084 2799 2594 2402 2254 2070 1929 1773 1606 1497 1359 1277 1216 1179 1129 1098 1046

4/99 5195 4582 3830 3211 2914 2701 2501 2347 2156 2008 1846 1672 1558 1415 1330 1266 1228 1176 1141 1094 1042

4/00 5538 4887 4083 3420 3106 2884 2670 2505 2300 2142 1970 1778 1657 1505 1413 1346 1306 1251 1217 1159 1108 1063

4/01 5759 5083 4246 3556 3230 2999 2777 2605 2392 2227 2049 1849 1724 1565 1470 1400 1358 1301 1265 1205 1152 1106 1040

4/02 6007 5302 4429 3709 3369 3128 2897 2717 2495 2323 2137 1929 1798 1633 1533 1460 1416 1357 1320 1257 1201 1153 1085 1043

78/7979/80 80/1 81/2 82/3 83/4 84/5 85/6 86/7 87/8 88/9 89/90 90/1 91/2 92/3 93/4 94/5 95/6 96/7 97/8 98/9 99/00 00/01 01/02

113

Table 2 - Composite divisors for tax years up to and including 1987/88

Use this table to obtain the divisor used to calculate the GMP, see Chapter 5

Tax years in working life Divisor Composite Divisor

1-20 80 4160

21 84 4368

22 88 4576

23 92 4784

24 96 4992

25 100 5200

26 104 5408

27 108 5616

28 112 5824

29 116 6032

30 120 6240

31 124 6448

32 128 6656

33 132 6864

34 136 7072

35 140 7280

36 144 7488

37 148 7696

38 152 7904

39 156 8112

40 60 8320

41 164 8528

42 168 8736

43 172 8944

44 176 9152

45 180 9360

continued

114

(Table 2 - Composite divisors for tax years up to and including 1987/88)


46 184 9568

47 188 9776

48 192 9984

49 196 10192

Table 3 - Composite divisors for tax years from 1988/89

Use this table to obtain the divisor used to calculate the GMP, see Chapter 5


1-20 100 5200

21 105 5460

22 110 5720

23 115 5980

24 120 6240

25 125 6500

26 130 6760

27 135 7020

28 140 7280

29 145 7540

30 150 7800

31 155 8060

32 160 8320

33 165 8580

34 170 8840

35 175 9100

36 180 9360

37 185 9620

38 190 9880

continued

115

(Table 3 - Composite divisors for tax years from 1988/89)


39 195 10140

40 200 10400

41 205 10660

42 210 10920

43 215 11180

44 220 11440

45 225 11700

46 230 11960

47 235 12220

48 240 12480

49 245 12740

116

Example 1 - TP calculation

Sex: Female

Date of Birth: 28 April 1955

Date of election to pay TP: 13 July 1993

Age attained in tax year in which the election was made: 38

Total GMP: £20.77

Post 88 GMP amount: £ 2.20

No LRP due

Pre 88 GMP

Amount: £18.57

Accrued rights factor: £18.57 x 52 = £965.64

Market Level Indicator (MLI) for July 1993: 118

Table amount for female aged 38: £6.47

Premium: (£6.47 x 118 x £965.64) ÷ 100 = £7372.28

Round the calculation up or down to the nearest 1p, taking 0.5p or higher to the next whole penny above.

Post 88 GMP

Amount: £2.20


MLI for July 1993: 118

Average MLI for July 1993: 104

Table amount for female age 38: £8.51

Premium (£8.51 x 118 x £114.40) ÷ 104 = £1104.60


Total premium: £7372.28 + £1104.60 = £8476.88


Note 1: MLI figures are assumed figures for the purpose of calculation

Note 2: Any incentive payments made for the employee are added to the TP

Note 3: Any interest payable is added to the total premium

117

Table 4 - Transfer Premium (TP)

Use this table if

• the event giving rise to the liability for the premium occurred before 6 April 1988, and

• the scheme operates

- Section 148, or

- fixed rate revaluation, or

- no revaluation is required

Age Male (£) Female (£) Age Male (£) Female (£)

16 5.56 6.79 41 6.15 7.55

17 5.58 6.82 42 6.18 7.59

18 5.60 6.85 43 6.20 7.63

19 5.63 6.88 44 6.23 7.67

20 5.65 6.91 45 6.27 7.71

21 5.67 6.94 46 6.30 7.75

22 5.69 6.97 47 6.33 7.80

23 5.71 7.00 48 6.36 7.84

24 5.73 7.02 49 6.40 7.89

25 5.76 7.05 50 6.45 7.95

26 5.78 7.08 51 6.49 8.01

27 5.80 7.11 52 6.53 8.06

28 5.82 7.13 53 6.58 8.12

29 5.85 7.16 54 6.63 8.19

30 5.88 7.19 55 6.68 8.26

31 5.90 7.22 56 6.74 8.33

32 5.93 7.25 57 6.80 8.41

33 5.95 7.28 58 6.87 8.50

34 5.97 7.31 59 6.95 8.59

35 6.00 7.34 60 7.03 9.41

36 6.02 7.37 61 7.12 -

37 6.05 7.41 62 7.22 -

38 6.07 7.45 63 7.34 -

39 6.10 7.48 64 7.47 -

40 6.12 7.52 65 8.26 -

118


Use this table if

• the event giving rise to the liability for the premium occurred before 6 April 1988, and

• an LRP has already been paid


16 1.29 1.76 41 3.06 4.28

17 1.33 1.83 42 3.17 4.44

18 1.38 1.90 43 3.27 4.60

19 1.43 1.97 44 3.39 4.77

20 1.48 2.05 45 3.52 4.95

21 1.54 2.12 46 3.65 5.13

22 1.59 2.20 47 3.78 5.33

23 1.64 2.28 48 3.92 5.53

24 1.70 2.35 49 4.06 5.75

25 1.76 2.43 50 4.22 5.98

26 1.82 2.52 51 4.38 6.22

27 1.88 2.61 52 4.54 6.46

28 1.95 2.70 53 4.71 6.72

29 2.02 2.79 54 4.89 6.99

30 2.10 2.89 55 5.07 7.27

31 2.17 2.99 56 5.27 7.57

32 2.25 3.10 57 5.48 7.89

33 2.32 3.21 58 5.71 8.23

34 2.40 3.33 59 5.96 8.59

35 2.49 3.45 60 6.21 9.41

36 2.57 3.57 61 6.49 -

37 2.67 3.70 62 6.78 -

38 2.76 3.84 63 7.11 -

39 2.86 3.98 64 7.47 -

40 2.96 4.13 65 8.26 -

119


Use this table if

• the event giving rise to the liability for the premium occurred after 5 April 1988 and before 6 April 1993, and


- Section 148, or



Part 1 - For GMP or parts of GMP built up before 6 April 1988


16 4.37 5.34 41 5.82 7.09

17 4.42 5.41 42 5.89 7.18

18 4.47 5.47 43 5.96 7.27

19 4.52 5.53 44 6.04 7.35

20 4.57 5.59 45 6.11 7.44

21 4.62 5.65 46 6.19 7.53

22 4.67 5.71 47 6.27 7.63

23 4.73 5.78 48 6.35 7.73

24 4.78 5.85 49 6.44 7.83

25 4.83 5.92 50 6.52 7.93

26 4.89 5.98 51 6.61 8.04

27 4.95 6.05 52 6.70 8.16

28 5.01 6.12 53 6.79 8.28

29 5.07 6.18 54 6.88 8.40

30 5.12 6.25 55 6.98 8.53

31 5.18 6.32 56 7.09 8.66

32 5.24 6.40 57 7.19 8.80

33 5.30 6.47 58 7.30 8.95

34 5.37 6.54 59 7.42 9.10

35 5.43 6.61 60 7.56 9.94

36 5.49 6.69 61 7.69 -

37 5.56 6.77 62 7.83 -

38 5.62 6.85 63 8.00 -

39 5.68 6.93 64 8.18 -

40 5.75 7.01 65 8.97 -

120

Part 2 - For GMP/parts of GMP built up after 5 April 1988 and before 6 April 1993


16 5.57 7.01 41 7.44 9.30

17 5.64 7.09 42 7.53 9.41

18 5.70 7.17 43 7.61 9.52

19 5.77 7.25 44 7.71 9.64

20 5.84 7.33 45 7.80 9.75

21 5.91 7.42 46 7.90 9.87

22 5.97 7.50 47 8.00 10.00

23 6.04 7.59 48 8.10 10.13

24 6.11 7.67 49 8.21 10.26

25 6.18 7.76 50 8.31 10.39

26 6.25 7.85 51 8.42 10.53

27 6.32 7.94 52 8.53 10.68

28 6.40 8.03 53 8.64 10.84

29 6.47 8.12 54 8.76 11.00

30 6.55 8.21 55 8.89 11.16

31 6.62 8.30 56 9.02 11.33

32 6.70 8.39 57 9.15 11.51

33 6.77 8.49 58 9.29 11.70

34 6.85 8.58 59 9.44 11.90

35 6.93 8.68 60 9.60 13.00

36 7.01 8.78 61 9.77 -

37 7.09 8.88 62 9.95 -

38 7.18 8.98 63 10.14 -

39 7.26 9.09 64 10.36 -

40 7.35 9.19 65 11.37 -

121


Use this table if

• the event giving rise to the liability for the premium occurred after 5 April 1988 and before 6 April 1993, and




16 1.60 2.13 41 3.64 4.83

17 1.66 2.21 42 3.76 5.00

18 1.72 2.29 43 3.88 5.17

19 1.78 2.37 44 4.01 5.35

20 1.84 2.45 45 4.14 5.53

21 1.90 2.53 46 4.28 5.71

22 1.96 2.61 47 4.43 5.91

23 2.03 2.70 48 4.58 6.12

24 2.10 2.79 49 4.73 6.33

25 2.17 2.88 50 4.89 6.56

26 2.24 2.97 51 5.06 6.79

27 2.31 3.07 52 5.23 7.03

28 2.38 3.17 53 5.41 7.28

29 2.46 3.27 54 5.60 7.55

30 2.54 3.38 55 5.80 7.83

31 2.62 3.49 56 6.01 8.12

32 2.71 3.61 57 6.22 8.43

33 2.80 3.73 58 6.45 8.76

34 2.89 3.85 59 6.69 9.10

35 2.99 3.97 60 6.95 9.94

36 3.08 4.11 61 7.22 -

37 3.18 4.25 62 7.52 -

38 3.29 4.39 63 7.83 -

39 3.40 4.53 64 8.18 -

40 3.52 4.68 65 8.97 -

122

Part 2 - For GMP/parts of GMP built up after 5 April 1988 and before 6 April 1993


16 2.05 2.79 41 4.63 6.33

17 2.13 2.90 42 4.79 6.55

18 2.20 3.00 43 4.95 6.77

19 2.28 3.11 44 5.11 7.00

20 2.35 3.21 45 5.28 7.24

21 2.43 3.32 46 5.46 7.48

22 2.51 3.43 47 5.65 7.74

23 2.59 3.54 48 5.84 8.01

24 2.67 3.65 49 6.03 8.29

25 2.76 3.77 50 6.24 8.58

26 2.85 3.90 51 6.46 8.88

27 2.95 4.03 52 6.68 9.20

28 3.05 4.16 53 6.90 9.53

29 3.15 4.29 54 7.14 9.88

30 3.25 4.43 55 7.38 10.25

31 3.35 4.58 56 7.64 10.63

32 3.46 4.73 57 7.91 11.04

33 3.57 4.89 58 8.20 11.46

34 3.69 5.05 59 8.51 11.90

35 3.82 5.21 60 8.83 13.00

36 3.94 5.38 61 9.17 -

37 4.07 5.56 62 9.54 -

38 4.20 5.75 63 9.94 -

39 4.34 5.94 64 10.36 -

40 4.48 6.13 65 11.37 -

123


Use this table if

• the event giving rise to the liability for the premium occurred after 5 April 1993, and


- Section 148, or





16 3.84 4.65 41 5.61 6.77

17 3.90 4.72 42 5.70 6.87

18 3.96 4.79 43 5.79 6.98

19 4.02 4.87 44 5.89 7.09

20 4.08 4.94 45 5.98 7.20

21 4.14 5.01 46 6.07 7.32

22 4.20 5.08 47 6.17 7.44

23 4.27 5.16 48 6.26 7.56

24 4.34 5.24 49 6.36 7.68

25 4.41 5.32 50 6.47 7.80

26 4.47 5.41 51 6.58 7.93

27 4.54 5.49 52 6.68 8.07

28 4.61 5.57 53 6.79 8.20

29 4.68 5.65 54 6.90 8.34

30 4.75 5.73 55 7.02 8.49

31 4.82 5.82 56 7.14 8.65

32 4.90 5.91 57 7.27 8.81

33 4.97 6.00 58 7.40 8.99

34 5.04 6.09 59 7.54 9.17

35 5.12 6.18 60 7.68 10.01

36 5.19 6.28 61 7.84 -

37 5.27 6.38 62 8.01 -

38 5.35 6.47 63 8.18 -

39 5.44 6.57 64 8.37 -

40 5.53 6.67 65 9.18 -

124

Part 2 - For GMP or parts of GMP built up after 5 April 1988


16 4.93 6.12 41 7.20 8.90

17 5.00 6.21 42 7.31 9.04

18 5.08 6.31 43 7.43 9.19

19 5.15 6.41 44 7.54 9.33

20 5.23 6.50 45 7.66 9.48

21 5.31 6.60 46 7.78 9.63

22 5.40 6.70 47 7.91 9.78

23 5.48 6.80 48 8.03 9.93

24 5.56 6.91 49 8.16 10.09

25 5.64 7.01 50 8.29 10.26

26 5.73 7.11 51 8.43 10.43

27 5.82 7.22 52 8.56 10.60

28 5.91 7.33 53 8.70 10.78

29 6.00 7.44 54 8.85 10.96

30 6.09 7.55 55 9.00 11.15

31 6.18 7.66 56 9.15 11.35

32 6.28 7.78 57 9.31 11.57

33 6.38 7.90 58 9.47 11.80

34 6.47 8.02 59 9.64 12.04

35 6.57 8.14 60 9.82 13.13

36 6.66 8.26 61 10.02 -

37 6.76 8.38 62 10.23 -

38 6.87 8.51 63 10.46 -

39 6.98 8.64 64 10.70 -

40 7.09 8.77 65 11.73 -

125


Use this table if

• the event giving rise to the liability for the premium occurred after 5 April 1993, and




16 1.70 2.20 41 3.79 4.94

17 1.75 2.27 42 3.92 5.10

18 1.81 2.35 43 4.05 5.28

19 1.86 2.43 44 4.19 5.46

20 1.92 2.51 45 4.33 5.64

21 1.99 2.59 46 4.47 5.83

22 2.05 2.67 47 4.62 6.03

23 2.12 2.76 48 4.77 6.23

24 2.20 2.85 49 4.93 6.44

25 2.27 2.94 50 5.10 6.66

26 2.34 3.04 51 5.27 6.89

27 2.41 3.14 52 5.44 7.13

28 2.49 3.24 53 5.63 7.38

29 2.57 3.35 54 5.83 7.64

30 2.66 3.46 55 6.03 7.92

31 2.75 3.57 56 6.23 8.21

32 2.84 3.69 57 6.45 8.51

33 2.93 3.81 58 6.68 8.83

34 3.02 3.94 59 6.92 9.17

35 3.12 4.07 60 7.17 10.01

36 3.22 4.20 61 7.44 -

37 3.32 4.34 62 7.73 -

38 3.43 4.48 63 8.04 -

39 3.55 4.63 64 8.37 -

40 3.67 4.78 65 9.18 -

126



16 2.17 2.90 41 4.87 6.50

17 2.24 2.99 42 5.03 6.72

18 2.31 3.09 43 5.20 6.94

19 2.39 3.20 44 5.37 7.17

20 2.47 3.30 45 5.55 7.42

21 2.55 3.41 46 5.73 7.67

22 2.64 3.52 47 5.93 7.92

23 2.72 3.64 48 6.12 8.19

24 2.81 3.76 49 6.32 8.47

25 2.90 3.88 50 6.53 8.76

26 3.00 4.00 51 6.76 9.06

27 3.10 4.13 52 6.98 9.38

28 3.20 4.26 53 7.21 9.71

29 3.30 4.40 54 7.46 10.05

30 3.41 4.55 55 7.72 10.40

31 3.52 4.70 56 7.98 10.77

32 3.64 4.85 57 8.26 11.17

33 3.76 5.01 58 8.55 11.59

34 3.88 5.18 59 8.85 12.04

35 4.01 5.35 60 9.17 13.13

36 4.14 5.52 61 9.51 -

37 4.27 5.70 62 9.88 -

38 4.41 5.89 63 10.28 -

39 4.56 6.09 64 10.70 -

40 4.71 6.29 65 11.73 -

127

Example 2 - Limited Revaluation Premium (LRP) calculation

Sex: Male

Date of Birth: 3 June 1940

Contracted-out employment ended: 2 February 1994

Age in year Contracted-out employment ended: 53

Total GMP: £22.40

Post 88 GMP amount: £3.10

Pre 88 GMP

Amount: £19.30


MLI for February 1994: 102

Table amount for male aged 53: £1.16

Premium: (£1.16 x 102 x £1003.60) ÷ 100 = £1187.46


Post 88 GMP

Amount: £3.10


MLI for February 1994 102

Average MLI for February 1994: 101

Table amount for male aged 53: £1.49

Premium: (£1.49 x 102 x £161.20) ÷ 101 = £242.57


Total Premium: £1187.46 + £242.57 = £1430.03


Note: MLI figures are assumed figures for the purpose of the calculation

Table 10 - Limited Revaluation Premium (LRP)

Use this table if the event giving rise to the liability for the premium occurred before 6 April 1988.


16 4.27 5.03 41 3.09 3.27

17 4.25 4.99 42 3.01 3.15

18 4.22 4.95 43 2.93 3.03

19 4.20 4.91 44 2.84 2.90

20 4.17 4.86 45 2.75 2.76

21 4.13 4.82 46 2.65 2.62

22 4.10 4.77 47 2.55 2.47

23 4.07 4.72 48 2.44 2.31

24 4.03 4.67 49 2.34 2.14

25 4.00 4.62 50 2.23 1.97

26 3.96 4.56 51 2.11 1.79

27 3.92 4.50 52 1.99 1.60

28 3.87 4.43 53 1.87 1.40

29 3.83 4.37 54 1.74 1.20

30 3.78 4.30 55 1.61 0.99

31 3.73 4.23 56 1.47 0.76

32 3.68 4.15 57 1.32 0.52

33 3.63 4.07 58 1.16 0.27

34 3.57 3.98 59 0.99 -

35 3.51 3.89 60 0.82 -

36 3.45 3.80 61 0.63 -

37 3.38 3.71 62 0.44 -

38 3.31 3.61 63 0.23 -

39 3.24 3.50

40 3.16 3.39

128

129


Use this table if the event giving rise to the liability for the premium occurred after 5 April 1988 andbefore 6 April 1993.



16 2.77 3.21 41 2.18 2.26

17 2.76 3.20 42 2.13 2.18

18 2.75 3.18 43 2.08 2.10

19 2.74 3.16 44 2.03 2.01

20 2.73 3.14 45 1.97 1.91

21 2.72 3.12 46 1.91 1.82

22 2.71 3.10 47 1.84 1.72

23 2.70 3.08 48 1.78 1.62

24 2.68 3.06 49 1.71 1.50

25 2.67 3.04 50 1.63 1.37

26 2.66 3.01 51 1.55 1.25

27 2.64 2.98 52 1.47 1.13

28 2.62 2.95 53 1.38 0.99

29 2.60 2.92 54 1.28 0.84

30 2.58 2.88 55 1.18 0.69

31 2.56 2.83 56 1.08 0.53

32 2.53 2.79 57 0.97 0.36

33 2.50 2.74 58 0.85 0.19

34 2.47 2.69 59 0.73 -

35 2.44 2.64 60 0.61 -

36 2.41 2.58 61 0.47 -

37 2.37 2.52 62 0.32 -

38 2.33 2.46 63 0.17 -

39 2.28 2.39

40 2.23 2.33

Part 2 - For GMP or parts of GMP built up after 5 April 1988 and before 6 April 1993


16 3.52 4.22 41 2.80 2.95

17 3.51 4.19 42 2.73 2.85

18 3.50 4.17 43 2.66 2.75

19 3.49 4.14 44 2.59 2.64

20 3.48 4.12 45 2.52 2.52

21 3.47 4.10 46 2.44 2.39

22 3.46 4.07 47 2.36 2.26

23 3.45 4.05 48 2.27 2.12

24 3.44 4.02 49 2.18 1.97

25 3.42 3.99 50 2.07 1.82

26 3.40 3.95 51 1.96 1.65

27 3.38 3.91 52 1.85 1.48

28 3.35 3.87 53 1.74 1.31

29 3.32 3.83 54 1.62 1.12

30 3.30 3.78 55 1.50 0.91

31 3.27 3.73 56 1.37 0.70

32 3.24 3.67 57 1.23 0.48

33 3.20 3.60 58 1.09 0.25

34 3.16 3.53 59 0.93 -

35 3.12 3.46 60 0.77 -

36 3.07 3.39 61 0.59 -

37 3.02 3.31 62 0.40 -

38 2.97 3.23 63 0.20 -

39 2.92 3.14

40 2.86 3.05

130130

131


Use this table if the event giving rise to the liability for a premium occurred after 5 April 1993.

Part 1 - for GMP or parts of GMP built up before 6 April 1988


16 2.15 2.45 41 1.82 1.83

17 2.15 2.45 42 1.78 1.77

18 2.15 2.44 43 1.74 1.70

19 2.15 2.44 44 1.70 1.63

20 2.15 2.43 45 1.65 1.56

21 2.15 2.42 46 1.60 1.49

22 2.15 2.41 47 1.55 1.41

23 2.15 2.40 48 1.49 1.33

24 2.14 2.39 49 1.43 1.24

25 2.14 2.38 50 1.37 1.14

26 2.13 2.37 51 1.31 1.04

27 2.13 2.35 52 1.24 0.94

28 2.12 2.33 53 1.16 0.82

29 2.11 2.30 54 1.07 0.70

30 2.09 2.27 55 0.99 0.57

31 2.07 2.25 56 0.91 0.44

32 2.06 2.22 57 0.82 0.30

33 2.04 2.19 58 0.72 0.16

34 2.02 2.15 59 0.62 -

35 2.00 2.11 60 0.51 -

36 1.97 2.08 61 0.40 -

37 1.95 2.04 62 0.28 -

38 1.92 1.99 63 0.14 -

39 1.89 1.94

40 1.86 1.89

132



16 2.76 3.22 41 2.33 2.4

17 2.76 3.22 42 2.28 2.33

18 2.76 3.22 43 2.23 2.25

19 2.76 3.21 44 2.17 2.16

20 2.76 3.20 45 2.11 2.06

21 2.76 3.19 46 2.05 1.96

22 2.76 3.18 47 1.98 1.86

23 2.76 3.16 48 1.91 1.74

24 2.75 3.15 49 1.84 1.62

25 2.74 3.13 50 1.76 1.50

26 2.73 3.11 51 1.67 1.37

27 2.72 3.09 52 1.58 1.22

28 2.71 3.07 53 1.49 1.07

29 2.70 3.04 54 1.39 0.91

30 2.68 3.00 55 1.28 0.75

31 2.66 2.96 56 1.17 0.58

32 2.64 2.93 57 1.05 0.40

33 2.62 2.89 58 0.92 0.21

34 2.59 2.84 59 0.79 -

35 2.56 2.79 60 0.65 -

36 2.52 2.74 61 0.51 -

37 2.49 2.68 62 0.35 -

38 2.46 2.62 63 0.18 -

39 2.42 2.55

46 2.38 2.48

Appendix 4 - Examples of calculations

List of examples

Example 1 Early leaver Guaranteed Minimum Pension (GMP) - where the period ofemployment is entirely pre 6 April 1997

Example 1A Early leaver GMP - where period of employment spans 6 April 1997

Example 2 Retirement GMP - where the period of employment is entirely pre 6 April 1997

Example 2A Retirement GMP - where period of employment spans 6 April 1997

Example 3 Member’s GMP - where the period of employment is entirely pre 6 April 1997 (member is deceased)

Example 3A Member’s GMP - where the period of employment spans 6 April 1997(member is deceased)

Example 4 Contributions Equivalent Premium (CEP)

Example 4A CEP including previous transfer from a Contracted-out Money Purchase(COMP)/Contracted-out Money Purchase Stakeholder Pension (COMPSHP)scheme or COMP part of a Contracted-out Mixed Benefit (COMB) scheme

Example 5 Certified Amount

Example 5A Certified amount if tax year 2000/01 onwards is involved

Example 5B Certified amount where there has been a transfer from a COMP/COMPSHPscheme or COMP part of a COMB scheme

Example 6 Inflation-proofing of the GMP

Example 7 Calculation of GMP increments where payment of the GMP is deferred past StatePension Age (SPA)

133

134

Example 1 - Early leaver GMP - where the period of employment is entirely pre 6 April 1997

Sex: Male

Date of birth: 4 June 1942

Years in working life: 29

Period of employment: 5 January 1987 - 30 March 1989

Tax year Contracted-out Earnings Revaluation Revaluedcontributions/earnings Factor Factor Earnings

Factor

1986/87 219.96x100/6.85 = 3211.09 = 3211 x 1168 = 3750448

1987/88 13320 x 1087 = 14478840

Total pre 182292886/4/88

1988/89 13728 x 1000* = 13728000

Total post 137280005/4/88

*No revaluation

Weekly GMP

Formula Total Revalued Earnings Factor ÷ Composite divisor ÷ 1000

Pre 6/4/88 18229288 ÷ 6032 ÷ 1000 = £3.02

Post 5/4/88 13728000 ÷ 7540 ÷ 1000 = £1.82

Weekly GMP = £4.84

Note 1: The earnings factors are rounded to the nearest £, eg £0.50 or more is rounded up to the next £.

Note 2: Details of both the Revaluation Factors and Composite Dividers are shown in Appendix 3.

Note 3: Onward revaluation - for fixed or limited rate of revaluation, both the total GMP and the post 5 April 1988 amount are revalued at the relevant rate. If revaluation uses Section 148 orders, the earnings factors are revalued, not the GMP.

Example 1A - Early leaver GMP - where the period of employment spans 6 April 1997

Use:

• the contracted-out contributions/earnings which relate to the period of employment for all taxyears up to and including the 1996/97 tax year

• the Section 148 order made in the tax year of termination to revalue the contracted-out earnings factors

Sex: Male

Date of birth: 29 March 1938


Period of employment: 6 April 1995 - 30 March 1999

Tax year Earnings Factor Revaluation Factor Revalued Earnings Factor

1995/96 21000 x 1500 = 31500000

1996/97 22000 x 1400 = 30800000

1997/98 23000 x 1300 = not taken into account

1998/99 24000 x 1000 = not taken into account

Total 62300000

Weekly GMP

Formula Total revalued Earnings Factor ÷ Composite divisor ÷ 1000

62300000 ÷ 6240 ÷ 1000

Weekly GMP = £9.98

Note1: Details of both the Revaluation Factors and Composite Dividers are shown in Appendix 3 (the revaluation factors used are assumed figures for the purposes of this calculation).

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136

Example 2 - Retirement GMP - where the period of employment is entirely pre 6 April 1997

Sex: Male



Period of employment: 6 April 1978 - 4 June 1986

Reached State Pension Age: 4 June 1986


Factor

1978/79 84.60x100/4 = 2115 = 2115 x 2210 = 4674150

1979/80 142.40x100/4 = 3560 = 3560 x 1950 = 6942000

1980/81 160.40x100/4.25 = 3774.11 = 3774 x 1629 = 6147846

1981/82 187.10x100/5.25 = 3563.80 = 3564 x 1364 = 4861296

1982/83 207.20x100/6.25 = 3315.20 = 3315 x 1239 = 4107285

1983/84 309.30x100/6.85 = 4515.32 = 4515 x 1151 = 5196765

1984/85 356.00x100/6.85 = 5197.08 = 5197 x 1066 = 5540002

1985/86 522.96x100/6.85 = 7634.45 = 7634 x 1000* = 7634000

1986/87 219.96 not takeninto account

Total 45103344

*Final relevant year - no revaluation

Weekly GMP


45103344 ÷ 4160 ÷ 1000

Weekly GMP = £10.84

Note 1: The earnings factors are rounded to the nearest £, eg. £0.50 or more is rounded up to the next £.

Note 2: If the member left contracted-out employment prior to the last complete tax year before SPA, theGMP at the date of leaving needs to be revalued up to SPA.

Scheme uses Section 148 revaluation

The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or the 1996/97 tax year if earlier), revalued using the Section 148 orders made in the lastcomplete tax year prior to SPA.

Scheme uses fixed or limited rate revaluation

The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or the 1996/97 tax year if earlier). These earnings factors should be revalued using theSection 148 orders made in the tax year of termination, to determine the early leaver GMP. The earlyleaver GMP should then be revalued up to the last complete tax year prior to SPA using the relevantrevaluation rate.

Note 3: Details of both the revaluation factors and composite dividers are shown in Appendix 3. (The revaluation factors used are assumed figures for the purposes of this calculation).

Example 2A - Retirement GMP - where the period of employment spans 6 April 1997

Use the contracted-out contributions/earnings which relate to the period of employment for all taxyears up to and including the 1996/97 tax year.

Sex: Male




Reached state pension age: 4 June 1999

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138

Example 2A - Retirement GMP - where the period of employment spans 6 April 1997


1988/89 13000 x 2134 = 27742000

1989/90 13500 x 1976 = 26676000

1990/91 14000 x 1854 = 25956000

1991/92 14500 x 1703 = 24693500

1992/93 15000 x 1586 = 23790000

1993/94 15500 x 1458 = 22599000

1994/95 16000 x 1321 = 21136000

1995/96 16500 x 1231 = 20311500

1996/97 17000 x 1118 = 19006000

1997/98 17500 not taken into account

1998/99 18000 not taken into account

1999/2000 Tax year member reached SPA - earnings not taken into account

Total 211910000

Weekly GMP

Formula Total Revalued Earnings Factor ÷ Composite Divider 1000

211910000 ÷ 5460 ÷ 1000

Weekly GMP = £38.81

Note 1: As the member reached SPA on 4 June 1999 the Earnings Factors have to be revalued using theSection 148 orders made in April 1998.

Note 2: If the member left contracted-out employment prior to the last complete tax year before SPA, theGMP at the date of leaving needs to be revalued up to SPA.


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier), revalued using the Section 148 orders made in the lastcomplete tax year prior to SPA.


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier). These earnings factors should be revalued using the Section148 orders made in the tax year of termination, to determine the early leaver GMP. The early leaverGMP should then be revalued up to the last complete tax year prior to SPA using the relevantrevaluation rate.

Note 3: Details of both the Revaluation Factors and Composite Dividers are shown in Appendix 3. (The revaluation factors used are assumed figures for the purposes of this calculation).

139

Example 3 - Member’s GMP - where the period of employment is entirely pre 6 April 1997 (member is deceased)

Sex: Male



Period of employment: 5 January 1987 - 30 March 1989

Date of death: 4 July 1990

Revaluation: by Section 148 orders


Factor

1986/87 219.96 x 100/6.85 = 3211.09 3211 x 1294 = 4155034

1987/88 13320 x 1205 = 16050600

Total pre 6/4/88 2020563

1988/89 13782 x 1108 = 15270456

Total post 5/4/88 15270456

Member’s weekly GMP


Pre 6/4/88 20205634 ÷ 6032 ÷ 1000 = £3.35

Post 5/4/88 15270456 ÷ 7540 ÷ 1000 = £2.03

Member’s weekly GMP = £5.38 (post 5/4/88 amount = £2.03)

Widow’s GMP

Formula GMP ÷ 2

£5.38 ÷ 2 (post 5/4/88 £2.03 ÷ 2)

Widow’s weekly GMP = £2.69 (post 5/4/88 amount = £1.02)

Note 1: If the deceased was female, any widower’s GMP is limited to the post 5 April 1988 amount.

Note 2: If a person leaves contracted-out employment and dies in the same tax year, the earnings factors forthat year are not taken into account when assessing any widow’s/widower’s GMP.

Note 3: As the member died on 4 July 1990, and the scheme’s chosen revaluation rate is Section 148 orders,the earnings factors have to be revalued using the Section 148 orders made in April 1989.

Note 4: If the member left contracted-out employment prior to the last complete tax year before death, theGMP at the date of leaving needs to be revalued up to the date of death.

140


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier), revalued using the Section 148 orders made in the lastcomplete tax year prior to death.


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier). These earnings factors should be revalued using the Section148 orders made in the tax year of termination, to determine the early leaver GMP. The early leaverGMP should then be revalued up to the last complete tax year prior to death using the relevantrevaluation rate.

Note 5: Details of both the Revaluation Factors and Composite Dividers are shown in Appendix 3.

Example 3A - Member’s GMP - where the period of employment spans 6 April 1997 (member is deceased)

Use the contracted-out contributions/earnings which relate to the period of employment for all taxyears up to and including the 1996/97 tax year.

Sex: Male




Date of death: 4 July 1999

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142

Example 3A - Member’s GMP - where the period of employment spans 6 April 1997(member is deceased)


1994/95 16000 x 1321 = 21136000

1995/96 16500 x 1231 = 20311500

1996/97 17000 x 1118 = 19006000

1997/98 17500 (not taken into account)

1998/99 18000 (not taken into account)

1999/2000 Tax year member died - earnings not taken into account

Total 60453500

Member’s weekly GMP

Formula Total Revalued Earnings Factor ÷ Composite Divider ÷ 1000

60453500 ÷ 8060 ÷ 1000

Member’s weekly GMP = £7.50

Widow’s weekly GMP

Formula Member’s GMP ÷ 2

£7.50 ÷ 2

Widow’s weekly GMP = £3.75

Note 1: If the deceased was female, any widower’s GMP is limited to the post 5 April 1988 amount.

Note 2: As the member died on 4 July 1999, the Earnings Factors have to be revalued using the Section 148orders made in April 1998.

Note 3: If the member left contracted-out employment before the last complete tax year before death, theGMP at the date of leaving needs to be revalued up to the date of death.

143


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier), revalued using the Section 148 orders made in the lastcomplete tax year before death.


The GMP should be calculated using all contracted-out earnings factors up to and including the dateof leaving (or 96/97 tax year if earlier). These earnings factors should be revalued using the Section148 orders made in the tax year of termination, to determine the early leaver GMP. The early leaverGMP should then be revalued up to the last complete tax year prior to death using the relevantrevaluation rate.

Note 4: Details of both the Revaluation Factors and Composite Dividers are shown in Appendix 3. (The revaluation factors used are assumed figures for the purposes of this calculation).

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Example 4 - Contributions Equivalent Premium (CEP)

Tax Year Contracted-out Total employee and CEP amountearnings (i.e. those employer Contributionbetween the LEL reduction dividedand the UEL) by 100

1995/96 12700.00 x 4.8 ÷ 100 = 609.60

1996/97 12800.00 x 4.8 ÷ 100 = 614.40

1997/98 12600.00 x 4.6 ÷ 100 = 579.60

1998/99 12800.00 x 4.6 ÷ 100 = 588.80

1999/00 13200.00x 4.6 ÷ 100 = 607.20

2000/01 13300.00 4.6 ÷ 100 = 611.80

2001/02 13500.00 4.6 ÷ 100 = 621.00

2002/03 13700.00 5.1 ÷ 100 = 698.70

An example of a CEP calculation is as follows:


Tax year Contracted-out Formula CEP amountearnings (i.e. thosebetween the LELand the UEL)

2000/01 13500.00 x 4.6 ÷ 100 = 621.00

2001/02 3800.00 x 4.6 ÷ 100 = 174.80

Total 795.80

Note: Round the calculation for each year up or down to the nearest 1p, taking 0.5p or higher as the next whole penny above.

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Example 4A - CEP including previous transfer from a COMP/COMPSHP scheme or COMP part of aCOMB scheme

Tax Year Contracted-out Formula CEP amountearnings (i.e.thosebetween the LELand the UEL)

1997/98 4840.00x 3.1 ÷ 100 = 150.04

1998/99 5260.00 x 3.1 ÷ 100 = 163.06

1999/00 7890.00 x 2.2 ÷ 100 = 173.58

2000/01 8100.00 x 2.2 ÷ 100 = 178.20

2001/02 8400.00 x 2.2 ÷ 100 = 184.80

2002/03 8650.00 x 2.6 ÷ 100 = 224.90

Period of employment: 1 December 1996 - 15 March 1998 period includes a transfer from a COMP scheme for the period 1 December 1996 - 13 July 1997.

Tax Year Contracted-out Formula CEP amountearnings (i.e.thosebetween the LELand the UEL)

1996/97 COMP 7436.00 x 4.8 ÷ 100 = 356.93

1997/98 COMP 4840.00 x 3.1 ÷ 100 = 150.04

1997/98 COSR 7796.00 x 4.6 ÷ 100 = 358.62

Total 865.59

Note 1: Round the calculation for each year up or down to the nearest 1p, taking 0.5p or higher as the nextwhole penny above.

Note 2: Any age related rebates made for the COMP period of service after 6 April 1997 are added to the CEP.

Note 3: Any incentive payments made for the employee are added to the CEP.

146

Example 5 - Certified Amount

Tax Year CEP Amount Rate of employee Certified contribution reduction amountdivided by total contribution reduction

1995/96 609.60 x 1.8 ÷ 4.8 = 228.60

1996/97 614.40 x 1.8 ÷ 4.8 = 230.40

1997/98 579.60 x 1.6 ÷ 4.6 = 201.60

1998/99 588.80 x 1.6 ÷ 4.6 = 204.80

1999/00 607.20 x 1.6 ÷ 4.6 = 211.20

2000/01 611.80 x 1.6 ÷ 4.6 = 212.80

2001/02 621.00 x 1.6 ÷ 4.6 = 216.00

2002/03 698.70 x 1.6 ÷ 5.1 = 219.20

An example of a Certified Amount calculation is as follows:


Tax year CEP amount Formula Certified amount

2000/01 621.00 x 1.6 ÷ 4.6 = 216.00

2001/02 174.80 x 1.6 ÷ 4.6 = 60.80

Total 276.80

Note: Round the calculation for each year up or down to the nearest 1p taking 0.5p or higher as the nextwhole penny above.

Example 5A - Certified Amount if tax year 2000/01 onwards is involved

Tax Year Earnings between Formula CEP AmountLEL and UEL

1999/00 12600x 4.6 ÷ 100 = 579.60

2000/01 10000x 4.6 ÷ 100 = 460.00

Total 1039.60

Certified Amount (as calculated and notified on CA1620)

Tax year CEP amount Formula Certified amount

1999/00 579.60 1.6 ÷ 4.6 = 201.60

2000/01 460.00 1.6 ÷ 4.6 = 160.00

Total 361.60

Employee has earnings of £77 for four weeks during the period of employment being bought backinto State Additional Pension.

Recalculated Certified Amount

Weekly

NIC rebate due on earnings between the LEL and Employee Earnings Threshold = £9.00 x 1.6% = £0.14

NIC payable on earnings above the Employee Earnings Threshold = £1.00 x 8.4% = £0.08

NIC rebate available to employee for offset against NICs payable = £0.08

NIC rebate available to employer for offset against overall NIC liability = £0.06

Total

The NIC rebate not enjoyed by the employee = £0.06 x 4 = £0.24

Recalculated Certified Amount = £361.60 - £0.24 = £361.36

147

Example 5B - Certified amount where there has been a transfer from a COMP/COMPSHP scheme orCOMP part of a COMB scheme

The certified amount is calculated using the formulas shown below:

Tax Year CEP Amount Formula Certified amount

1997/98 150.04 x 1.6 ÷ 3.1 = 77.44

1998/99 163.06 x 1.6 ÷ 3.1 = 84.16

1999/00 173.58 x 1.6 ÷ 2.2 = 126.24

2000/01 178.20 x 1.6 ÷ 2.2 = 129.60

2001/02 184.80 x 1.6 ÷ 2.2 = 134.40

2002/03 224.90 x 1.6 ÷ 2.6 = 138.40

Period of employment: 1 December 1996 - 15 March 1998 which includes a transfer from a COMPscheme for the period 1 December 1996 - 13 July 1997

Tax Year CEP Amount Formula Certified amount

1996/97 COMP 356.93 x 1.8 ÷ 4.8 = 133.85

1997/98 COMP 150.04 x 1.6 ÷ 3.1 = 77.44

1997/98 COSR 358.62 x 1.6 ÷ 4.6 = 124.74

Total 336.03

Note 1: Round the calculation for each year up or down to the nearest 1p, taking 0.5p or higher as the nextwhole penny above.

148

149

Example 6 - Inflation-proofing of the GMP

When the GMP is put into payment post 5 April 1988, GMP must be inflation-proofed by the schemeby the lower of


• 3%

Post 5 April 1988 inflation-proofing rates

The post 5 April 1988 inflation-proofing rates are as follows:

April 1990: 3 %

April 1991: 3 %

April 1992: 3 %

April 1993: 3 %

April 1994: 1.8 %

April 1995: 2.2 %

April 1996: 3 %

April 1997: 2.1 %

April 1998: 3 %

April 1999: 3 %

April 2000: 1.1%

April 2001: 3 %

April 2002: 1.7 %

Example of inflation proofing

SPA: 19 December 1990

GMP earned at SPA: £12.69

Pre 6 April 1988 GMP: £6.75

Post 5 April 1988 GMP: £5.94

GMP is put into payment on 19 December 1990

The GMP payable by the scheme on 19 December 1990 is £12.69 (ie, £6.75 + £5.94)

GMP payable in the second year


Post 5 April 1988 GMP: £5.94 + 3% = £6.12

Total GMP payable: £6.75 + £6.12 = £12.87

Example 7 - Calculation of GMP increments where payment of GMP is deferred past SPA

SPA: 19 December 1990

GMP earned at SPA: £12.69


Post 5 April 1988 GMP: £5.94

Post 5 April 1988 inflation-proofed GMP: £5.94 + 3% = £6.12

Date GMP deferred to: 3 July 1991

Number of weeks in deferment period: 28

When the GMP is deferred past SPA, increments can be earned on the GMP, provided that the GMP isdeferred for at least 49 days after SPA.

Any post 5 April 1988 GMP must be inflation-proofed before the increments are calculated.

Formula weekly GMP x number of weeks in deferment period ÷ 700

Post 6/4/88 GMP increments: £6.75 x 28 ÷ 700 = £0.27

Post 5/4/88 GMP increments: £6.12 x 28 ÷ 700 = £0.24

Total GMP increments = £0.27 + £0.24 = £0.51

150

151

Appendix 5 - How membership of a Contracted-out Salary Related(COSR) scheme or COSR part of a Contracted-out Mixed Benefit(COMB) scheme affects State Additional Pension

Introduction

1 The Additional Pension (AP) is the earnings-related part of both the Retirement Pension andbereavement benefit. It is also known as the State Earnings Related Pension Scheme (SERPS) from 6 April 2002 SERPS was reformed by State Second Pension. The amount of AP a person can get isbased on the amount and type of earnings on which they (or their late spouse), have paid NationalInsurance contributions (NICs) from 6 April 1978.

2 Between 6 April 1997 and 5 April 2002 members of contracted-out schemes will cease to build upany further entitlement to AP. However, they will retain their entitlement to any AP accrued between6 April 1978 and 5 April 1997. From 6 April 2002 members of contracted-out schemes earningbetween the Lower Earnings Limit (LEL) and the Lower Earnings Threshold (LET) will also build upentitlement to State Second Pension.

3 From April 2002 members of contracted-out occupational pension schemes may accrueAP entitlement under State Second Pension depending upon the level of their earnings.

4 AP can only be paid from the date an individual reaches State Pension Age (SPA) and claims theirState Retirement Pension. Widows and widowers may also receive AP based on their latespouse’s earnings.

Deductions from the Additional Pension for the member

5 Any AP earned between the 1978/79 and 1996/97 tax years will be reduced as a result ofmembership of a COSR scheme or COSR part of a COMB scheme. The amount by which AP isreduced is known as the Contracted-out Deduction (COD).

6 For members of a COSR scheme or a COSR part of a COMB scheme, the COD is equal to theGuaranteed Minimum Pension (GMP) payable by the scheme.

7 These deductions also take into account any rights transferred into the COSR scheme or COSR part ofa COMB scheme from:


• a Contracted-out Money Purchase (COMP)/Contracted-out Money Purchase Stakeholder Pension(COMPSHP) scheme

• a COMP or COSR part of a COMB scheme, or

• an Appropriate Personal Pension (APP)/Appropriate Personal Pension Stakeholder Pension(APPSHP) scheme.

The AP will be reduced by the COD even if pension rights have been commuted as a lump sumon the grounds of triviality, or where a member’s pension rights have been subject to pensionsharing on divorce. Schemes should tell any member who opts for commutation about this.

Deductions from the Additional Pension for the widow or widower

8 If a member of a COSR scheme dies, leaving a qualifying widow or widower, see Chapter 12,paragraph 12.22 and 12.23, the amount of COD taken from their inherited AP will be equal to halfthat of the member’s GMP payable by the scheme.

152

Appendix 6 - Examples of Dual Guaranteed Minimum Pension (GMP) calculations

List of examples

True sex female

Example 1 GMP calculation covering the full period of contracted-out employment - Female

Example 2 True sex GMP calculation covering the period 1990/91 to 1996/97 - Female

Example 3 Opposite sex GMP calculation covering the period 1990/91 to 1996/97 - Male

True sex male

Example 4 GMP calculation covering the full period of contracted-out employment - Male

Example 5 True sex GMP calculation covering the period 1990/91 to 1996/97 - Male

Example 6 Opposite sex GMP calculation covering the period 1990/91 to 1996/97 - Female

153

True sex female

Example 1 - GMP calculation covering the full period ofcontracted-out employment

Sex: Female

Date of birth: 10 August 1934

Period of employment: 10 June 1988 - 6 December 1995

Attains State Pension Age (SPA): 10 August 1994

Final Relevant Year (FRY): 1993/1994

Number of years in working life: 16

Tax year Earnings Revaluation Revalued earnings factor factor

1988/89 £5000 1458 £7290000

1989/90 £6000 1321 £7926000

1990/91 £7000 1231 £8617000

1991/92 £8000 1118 £8944000

1992/93 £9000 1050 £9450000

1993/94 £10000 FRY 1000* £10000000

1994/95 £6000 FRY+1 Not to be taken into account

1995/96 £0000 Not to be taken into account

* FRY - no revaluation Total £52227000

Weekly GMP

Formula Total Revalued Earnings Factor ÷ Composite Divisor ÷ 1000

Weekly £52227000 ÷ 5200 ÷ 1000 = £10.04

As the woman has attained SPA, RPI at 2.2% has been applied for one year: £10.04 + 2.2% = £10.26

True sex female

Example 2 - True sex GMP calculation covering the period 1990/91 to 1996/97

Sex: Female


Period of employment: 6 April 1990 - 6 December 1995





1990/91 £7000 1231 £8617000

1991/92 £8000 1118 £8944000

1992/93 £9000 1050 £9450000

1993/94 £10000 FRY 1000* £10000000

1994/95 £6000 FRY+1 Not to be taken into account

1995/96 £0000 Not to be taken into account


Weekly GMP


Weekly £37011000 ÷ 5200 ÷ 1000 = £7.12

As the woman has attained SPA, RPI at 2.2% has been applied for one year: £7.12 + 2.2% = £7.28

154

155

True sex female

Example 3 - Opposite sex GMP calculation covering the period1990/91 to 1996/97

Sex: Male


Period of employment: 6 April 1990 - 6 December 1995




1990/91 £7000 1325 £9275000

1991/92 £8000 1204 £9632000

1992/93 £9000 1131 £10179000

1993/94 £10000 1077 £10770000

1994/95 £6000 1044 £6264000

1995/96 £0000 1000* £0000000


Weekly GMP


Weekly £46120000 ÷ 5460 ÷ 1000 = £8.45

The earnings paid in the woman’s 60th birthday tax year (FRY + 1) have been taken intoaccount in the opposite sex calculation.

True sex male

Example 4 - GMP calculation covering the full period ofContracted-out employment

Sex: Male

Date of birth: 1 January 1934

Period of employment: 10 June 1988 - 1 March 1995

Revaluation requested to: 1 November 1995

Attains State Pension Age (SPA): 1 January 1999




1988/89 £2000 1503 £3006000

1989/90 £3000 1362 £4086000

1990/91 £4000 1269 £5076000

1991/92 £5000 1153 £5765000

1992/93 £6000 1083 £6498000

1993/94 £7000 1031 £7217000

1994/95 £3000 1000 £3000000

Total £34648000

Weekly GMP


Weekly £34648000 ÷ 5200 ÷ 1000 = £6.66

£6.66 + one year’s revaluation at a fixed rate of 7% = £7.13

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157

True sex male

Example 5 - True sex GMP calculation covering the period 1990/91 to 1996/97

Sex: Male








1990/91 £4000 1269 £5076000

1991/92 £5000 1153 £5765000

1992/93 £6000 1083 £6498000

1993/94 £7000 1031 £7217000

1994/95 £3000 1000 £3000000

Total £27556000

Weekly GMP


Weekly £27556000 ÷ 5200 ÷ 1000 = £5.30

£5.30 + one year’s revaluation at a fixed rate of 7% = £5.67

True sex male

Example 6 - Opposite sex GMP calculation covering the period1990/91 to 1996/97

Sex: Female







1990/91 £4000 1173 £4692000

1991/92 £5000 1065 £5325000

1992/93 £6000 1000 £6000000

1993/94 £7000* Not to be taken into account

1994/95 £3000* Not to be taken into account

Total £16017000

Weekly GMP


Weekly £16017000 ÷ 5200 ÷ 1000 = £3.08

Because the woman has attained SPA, RPI has been applied as follows: £3.08 + 1.8% = £3.14

£3.14 + 2.2% = £3.21

*The earnings paid in the 1993/94 and 1994/95 tax years have been ignored in the opposite sex calculation.

158

159

Appendix 7 - LeafletsThese DWP and Inland Revenue National Insurance Contributions Office leaflets give information onrelated topics.

CA39 NI tables for Contracted-out Salary Related (COSR) Schemes - excluding mariners

CA43 NI tables for Contracted-out Money Purchase (COMP)/Contracted-outMoney Purchase Stakeholder Pension (COMPSHP) minimum paymenttables - excluding mariners

The above leaflets are available from


CA42 All NI tables for Mariners i.e those for Contracted-out Salary Related schemes and, Contracted-out money Purchase (COMP)/Contracted-out Money Purchase Stakeholder Pension (COMPSHP) schemes and COMP/COMPSHP minimum payment tables

The above leaflet is available from

✉ HM Inspector of Taxes (Cardiff 6 District)Ty - Glas RoadLlanishenCardiffCF4 5TW

CA29 Employers Manual on Statutory Maternity Pay

CA72 National Insurance contributions - deferring payment

CWG1 Employer's Helpcards

The above leaflets are available from your nearest Inland Revenue office.

IB202 Incapacity Benefit

NP45 A Guide to Widows pension

NP46 A Guide to Retirement Pensions

The above leaflets are available from your nearest DWP office.

PP4 A Guide to the Financial Services Act for Employers

The above leaflet is available from

✉ DSS PensionsFREEPOST BS555/1BristolBS99 1BL

160

Appe

ndix

8 - C

OSR

early

leav

er ter

mina

tion,

trans

fer, b

uy o

ut an

d ch

ange

of R

espon

sible

Payin

g Aut

horit

y (R

PA) n

otifi

catio

ns

Qui

ck R

efere

nce G

uide

Peri

od

of

CO

SR e

mp

loym

ent

Pen

sio

n r

igh

ts r

etai

ned

in t

he

sch

eme

Pen

sio

n r

igh

ts t

ran

sfer

red

Sect

ion

32

buy

-out

C

han

ge

of

Res

po

nsi

ble

Pay

ing

Ag

ent

(RPA

)

Beg

ins

and

en

ds

bef

ore

6 A

pri

l 199

7G

MP

right

s ar

e re

tain

ed in

the

sche

me

at t

he s

chem

es r

eval

uatio

nra

te o

f:

•S1

48 -

sub

mit

form

CA

1616

•Fi

xed

rate

- s

ubm

it fo

rm C

A16

15

•Li

mite

d ra

te -

sub

mit

form

CA

1612

GM

P rig

hts

may

be

tran

sfer

red

to:

•an

othe

r C

OSR

or

activ

e C

OSR

par

t of

a C

OM

B sc

hem

e at

:

-S1

48 -

sub

mit

form

C

A16

17

-Fi

xed

rate

- s

ubm

it fo

rm

CA

1599

-Li

mite

d ra

te -

sub

mit

form

C

A16

00

•a

CO

MP/

CO

MPS

HP

sche

me

orac

tive

CO

MP

par

t of

a C

OM

Bsc

hem

e -

subm

it fo

rm C

A16

01

•an

APP

/APP

SHP

sche

me

- su

bmit

form

CA

1602

•an

ove

rsea

s sc

hem

e -

subm

itfo

rm C

A18

90

GM

P rig

hts

reta

ined

in a

CO

SRsc

hem

e m

ay b

e bo

ught

out

with

an

app

rove

d In

sura

nce

Com

pan

y.Su

bmit

form

:

•C

A16

10 if

a n

otic

e of

ter

min

atio

nha

s al

read

y be

en s

ent,

or

•C

A18

91 if

a n

otic

e of

ter

min

atio

nha

s n

ot

alre

ady

been

sen

t

The

resp

onsi

bilit

y fo

r G

MP

right

sre

tain

ed in

the

sch

eme

may

be

chan

ged

to a

noth

er p

ayin

g au

thor

ity.

If th

is n

ew a

utho

rity

is:

•an

othe

r C

OSR

sch

eme

•a

CO

MP/

CO

MPS

HP

sche

me

•a

CO

MB

sche

me

(pro

vide

d th

eG

MP

right

s w

ere

tran

sfer

red

toan

act

ive

par

t)

•an

APP

/APP

SHP

sche

me

subm

it fo

rm:

•C

A18

88 if

a n

otic

e of

ter

min

atio

nha

s al

read

y be

en s

ent,

or

•C

A18

89 if

a n

otic

e of

ter

min

atio

nha

s n

ot

alre

ady

been

sen

t

Beg

ins

bef

ore

6 A

pri

l 199

7 an

den

ds

on

or

afte

r 6

Ap

ril 1

997

GM

P rig

hts

and

pos

t ‘9

7 C

OSR

rig

hts

may

be

reta

ined

in t

he s

chem

e an

dth

e G

MP

right

s re

valu

ed b

y th

esc

hem

es r

eval

uatio

n ra

te o

f:

•S1

48,

or

•Fi

xed

rate

subm

it fo

rm C

A18

86

GM

P rig

hts

and

pos

t ‘9

7 C

OSR

rig

hts

may

be

tran

sfer

red

to:

•an

othe

r C

OSR

sch

eme

or a

ctiv

eC

OSR

par

t of

a C

OM

B sc

hem

e. If

so,

GM

P rig

hts

may

be

tran

sfer

red

at t

he s

chem

esch

osen

rev

alua

tion

rate

(Se

ctio

n14

8 or

fix

ed r

ate)

•a

CO

MP/

CO

MPS

HP

sche

me

orac

tive

CO

MP

par

t of

a C

OM

Bsc

hem

e

•an

APP

/APP

SHP

sche

me

subm

it fo

rm C

A18

87

•an

ove

rsea

s sc

hem

e -

subm

itfo

rm C

A18

90

GM

P rig

hts

and

pos

t ‘9

7 C

OSR

rig

hts

reta

ined

in a

CO

SR s

chem

e m

ay b

ebo

ught

out

with

an

app

rove

dIn

sura

nce

Com

pan

y. S

ubm

it fo

rm:

•C

A16

10 if

a n

otic

e of

ter

min

atio

nha

s al

read

y be

en s

ent,

or

•C

A18

91 if

a n

otic

e of

ter

min

atio

nha

s n

ot

alre

ady

been

sen

t

The

resp

onsi

bilit

y fo

r G

MP

right

s an

dp

ost

‘97

CO

SR r

ight

s re

tain

ed in

the

sche

me

may

be

tran

sfer

red

toan

othe

r p

ayin

g au

thor

ity.

If th

is n

ewau

thor

ity is

:

•an

othe

r C

OSR

sch

eme

•a

CO

MP/

CO

MPS

HP

sche

me

•a

CO

MB

sche

me

(pro

vide

d th

eG

MP

right

s an

d p

ost

‘97

CO

SRrig

hts

wer

e tr

ansf

erre

d to

an

activ

e p

art)

•an

APP

/APP

SHP

sche

me

subm

it fo

rm:

•C

A18

88 if

a n

otic

e of

ter

min

atio

nha

s al

read

y be

en s

ent,

or

•C

A18

89 if

a n

otic

e of

ter

min

atio

nha

s n

ot

alre

ady

been

sen

t

✄

161

Peri

od

of

CO

SR e

mp

loym

ent

Pen

sio

n r

igh

ts r

etai

ned

in t

he

sch

eme

Pen

sio

n r

igh

ts t

ran

sfer

red

Sect

ion

32

buy

-out

C

han

ge

of

Res

po

nsi

ble

Pay

ing

Ag

ent

(RPA

)

Beg

ins

and

en

ds

afte

r 6

Ap

ril 1

997

Post

‘97

CO

SR r

ight

s m

ay b

e re

tain

edin

the

sch

eme

subm

it fo

rm C

A188

6

Post

‘97

CO

SR r

ight

s m

ay b

etr

ansf

erre

d to

eith

er:

•an

othe

r C

OSR

sch

eme

or a

ctiv

eC

OSR

par

t of

a C

OM

B sc

hem

e

•a

CO

MP/

CO

MPS

HP

sche

me

orac

tive

CO

MP

part

of a

CO

MB

sche

me

subm

it fo

rm C

A188

7

•an

ove

rsea

s sc

hem

e -

subm

it fo

rmC

A189

0

Post

’97

CO

SR r

ight

s re

tain

ed in

aC

OSR

sch

eme

may

be

boug

ht o

utw

ith a

n ap

prov

ed In

sura

nce

Com

pany

.Su

bmit

form

:

•C

A161

0 if

a no

tice

of t

erm

inat

ion

has

alre

ady

been

sen

t, o

r

•C

A189

1 if

a no

tice

of t

erm

inat

ion

has

not

alre

ady

been

sen

t

The

resp

onsib

ility

for

post

‘97

CO

SRrig

hts

reta

ined

in t

he s

chem

e m

ay b

etr

ansf

erre

d to

ano

ther

pay

ing

auth

ority

. If t

his

new

aut

horit

y is:

•an

othe

r C

OSR

sch

eme

•a

CO

MP/

CO

MPS

HP

sche

me

•a

CO

MB

sche

me

(pro

vide

d th

epo

st ‘9

7 C

OSR

rig

hts

wer

etr

ansf

erre

d to

an

activ

e pa

rt)

•an

APP

/APP

SHP

sche

me

subm

it fo

rm

•C

A188

8 if

a n

otic

e of

ter

min

atio

nha

s al

read

y be

en s

ent,

or

•C

A188

9 if

a no

tice

of t

erm

inat

ion

has

not

alre

ady

been

sen

t

Imp

ort

ant

no

tes:

1Fr

om 6

Ap

ril 1

997

a tr

ansf

er t

o a

sect

ion

53 s

chem

e (f

orm

erly

con

trac

ted-

out)

sch

eme

can

only

tak

e p

lace

if t

he e

mp

loye

e ap

plie

d fo

r th

e tr

ansf

er b

efor

e 6

Ap

ril 1

997

2If

a C

OSR

sch

eme

switc

hes

to C

OM

P st

atus

on

5 A

pril

199

7, t

he p

re ‘9

7 C

OSR

rig

hts

held

in t

hat

sche

me

can

no

tbe

tra

nsfe

rred

to

the

CO

MP

sche

me

set

up f

rom

6 A

pril

199

7

3Tr

ansf

ers

cann

ot b

e m

ade

to a

n in

activ

e p

art

of a

CO

MB

sche

me

✄

162

Appe

ndix

9 - S

tatus

of A

ccru

ed P

ensio

n Ri

ghts

on tr

ansfe

r to

anot

her C

OSR,

COM

P/COM

PSHP

, COM

B or

APP/A

PPSH

P sch

eme

Qui

ck R

efere

nce G

uide

Typ

e o

f ri

gh

ts h

eld

in s

chem

e p

rio

r to

tran

sfer

To C

OSR

sch

eme

or

the

acti

ve C

OSR

par

t o

f a

CO

MB

sch

eme

To C

OM

P/C

OM

PSH

P sc

hem

e o

r th

eac

tive

CO

MP

par

t o

f a

CO

MB

sch

eme

To a

n A

PP/A

PPSH

P sc

hem

e

Pre

6 A

pri

l 199

7 G

MP

rig

hts

GM

P ri

gh

ts r

emai

n p

re 6

Ap

ril 1

997

GM

P ri

gh

ts

GM

P ri

gh

ts b

eco

me

pre

6 A

pri

l 199

7p

rote

cted

rig

hts

GM

P ri

gh

ts b

eco

me

pre

6 A

pri

l 199

7p

rote

cted

rig

hts

Post

5 A

pril

199

7 C

OSR

rig

hts

CO

SR r

ight

s re

mai

n p

ost

5 A

pril

199

7C

OSR

rig

hts

CO

SR r

ight

s be

com

e p

ost

5 A

pril

199

7p

rote

cted

rig

hts

CO

SR r

ight

s be

com

e p

ost

5 A

pril

199

7p

rote

cted

rig

hts

Pre

6 A

pril

199

7 p

rote

cted

rig

hts

Pre

6 A

pril

199

7 p

rote

cted

rig

hts

beco

me

pre

6 A

pril

199

7 G

MP

right

s

Pre

6 A

pril

199

7 p

rote

cted

rig

hts

rem

ain

as s

uch

Pre

6 A

pril

199

7 p

rote

cted

rig

hts

rem

ain

as s

uch

Post

5 A

pril

199

7 p

rote

cted

rig

hts

Post

5 A

pril

199

7 p

rote

cted

rig

hts

beco

me

pos

t 5

Ap

ril 1

997

CO

SR r

ight

s

Post

5 A

pril

199

7 p

rote

cted

rig

hts

rem

ain

as s

uch

Post

5 A

pril

199

7 p

rote

cted

rig

hts

rem

ain

as s

uch

✄

163

Alphabetical index

Accrued Guaranteed Minimum Pension Liability Service (AGLS) 1.28Accrued rights

Internal transfer from the COSR part to the active COMP part of the same COMB scheme 11.24Retained in the COSR part of the COMB scheme 11.26Retained in the COMB scheme on termination 11.36Only in the COMB scheme 11.43, 11.44Transferred to another COMB scheme, COSR, COMP/COMPSHP or APP/APPSHP scheme 11.49Transferred to the active COSR part of another COMB scheme or COSR part 11.51Transferred to active COMP part of another COMB scheme or COMP/COMPSHP scheme 11.63Transferred to an APP/APPSHP scheme 11.70Splitting 11.79

Additional Pension (AP)How membership of a COSR scheme or COSR part of a COMB scheme affects AP Appendix 5Deductions from the Additional Pension for the member Appendix 5Deductions from the Additional Pension for the widow or widower Appendix 5

Anti-franking legislation requirements for GMPGeneral 7.1Those protected by the legislation 7.2Member’s benefit is protected 7.3Pension provision for a scheme member 7.4Circumstances in which a widow’s or widower’s benefit is protected 7.5Pension provision for widows or widowers 7.6Exemption 7.7Short service benefit 7.8

Appropriate Personal Pension (APP)/Appropriate Personal PensionStakeholder Pension (APPSHP) schemes

Transfer 9.46, 10.19Incoming transfer 9.71Rights accrued in a COMB scheme transferred to an APP/APPSHP scheme 11.49, 11.70

Buying back GMP rights/post 97 COSR rights into the same schemeWhat is a CEP? 8.2Conditions for payment of a CEP 8.4Time limits for payment of CEPs 8.6Calculation of a CEP 8.12Notifying Services to Pensions Industry 8.18Calculation of payment by Services to Pensions Industry 8.21How to pay a CEP 8.22Refund of a CEP 8.32When can a TP be paid? 8.51Extension of time limits 8.57Calculating a TP 8.60

Buying out GMP and/or Post ‘97 COSR rightsWhen can a buy-out take place? 10.1Conditions for a buy-out 10.4Buy-out without consent 10.5Notifying Services to Pensions Industry 10.7Transferring bought-out GMP and/or Post `97 COSR Rights 10.12Transfer to a COSR scheme or the active COSR part of a COMB scheme 10.15Transfer to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme 10.17Transfer to an APP/APPSHP scheme 10.19Transfer to an overseas scheme or an overseas arrangement 10.22

Calculating GMPGeneral 5.1Earnings factors 5.6Revaluation of earnings factors 5.18

164

Calculations (Examples) Appendix 4Calculation of:

GMP 5.1LRP 6.11MLI 6.13CEP 8.12TP 8.60

Certified Amount Appendix 4Trivial Commutation 12.14Composite divisors Appendix 3Contracted-out Contribution Information Service (COCIS) 1.34Contracted-out Mixed Benefit (COMB) schemes

Background 11.1Schemes operating an active COMP or COSR part 11.3COSR schemes switching to COMP status from 6 April 1997 11.8COMB schemes operating both active COMP and COSR parts 11.11Notifications of termination of employment within a COMB scheme 11.13Notifications to use 11.18Internal transfers between parts of a COMB scheme 11.21Internal transfer of membership and accrued GMP and/or Post ‘97 Rights from the COSR part to the active COMP part of the same scheme 11.24Internal transfer of membership only from the COSR part to the active COMP part of a COMB scheme and previously accrued COSR rights are retained in the COSR part of the COMB scheme 11.26Accrued rights retained in the COMB scheme on termination 11.36Buying back GMP rights and Post ‘97 COSR Rights into the state scheme 11.40GMP rights and/or Post ‘97 COSR Rights only have accrued in the COMB scheme 11.43GMP and/or Post ‘97 COSR Rights and protected rights have accrued in the COMB scheme 11.44Transfers of rights accrued in a COMB scheme to another COMB, COSR, COMP/COMPSHP or APP/APPSHP scheme 11.49Transfer of rights accrued in a COMB scheme to the active COSR part of another COMB scheme or COSR scheme 11.51Previous GMP transfer with Section 148 revaluation 11.54Previous GMP transfer with fixed or limited rate revaluation 11.55Transfer of rights accrued in a COMB scheme to the active COMP part of another COMB scheme or COMP/COMPSHP scheme 11.63Transfer of rights accrued in a COMB scheme to an APP/APPSHP scheme 11.70Transfer from an active COSR part of a COMB scheme to an overseas occupational pension scheme, other than one which is or was contracted-out and still under the financial supervision of Services to Pensions Industry 11.76Buying-out a GMP and/or Post `97 COSR Rights 11.79Splitting the rights accrued in a COMB scheme 11.80

Contracted-out Money Purchase (COMP) Contracted-out Money Purchase Stakeholder Pension (COMPSHP) schemes

Transferring to a COMP/COMPSHP scheme or the active COMP part of a COMB scheme 9.36Incoming transfer 9.71Transfer to the active COMP/COMPSHP or active COMP part of a COMB scheme 9.43, 10.17Rights accrued in a COMB scheme transferred to another COMB, COSR, COMP/COMPSHP orAPP/APPSHP scheme 11.49Rights accrued in a COMB scheme transferred to the active COMP part of another COMB scheme or COMP/COMPSHP scheme 11.63

Contracted-out Salary Related (COSR) schemesBuying back ‘97 rights into the state scheme 8.1, 11.40Transferring ‘97 rights to other schemes 9.1Transfer to a COSR scheme or the active COSR part of a COMB scheme 9.43, 10.15Splitting Post ‘97 Rights 9.63Buying-out Post ‘97 Rights 10.1Transferring Post ‘97 Rights 10.12Switching to COMP status from 6 April 1997 11.8

165

Rights accrued in a COMB scheme transferred to a COSR scheme 11.49Rights accrued in a COMB scheme transferred to the active COSR part of another COMB scheme or COSR scheme 11.51Forms Appendix 1

Contracting-outChanges from 6 April 2001 2.7Termination procedures 2.6National Insurance contributions 2.8COSR 2.14

Services to Pensions Industry 1.6Contributions Equivalent Premium (CEP)

Contributions Equivalent Premium (CEP) (Examples) Appendix 4Annual reconciliation check 1.35What is a CEP? 8.2Condition for payment of a CEP 8.4Time limits for payments of CEPs 8.6Calculation of a CEP 8.12How to pay a CEP 8.22Refund of a CEP 8.32

Change:of ECON 4.32in method of preservation 4.51of RPA 4.53

DefermentDeferred payment of contributions 4.26Payment of the GMP is deferred 12.9Calculation of GMP increments where payment is deferred past SPA Appendix 4

Dual GMP Calculation FacilityBackground 14.1How the facility works 14.7The information you will receive 14.10

Dual GMP calculations (Examples) Appendix 6Early leaver GMP Appendix 4Earnings factors 5.6

Revaluation of 5.18Employee’s rights:

to a transfer value 9.1on termination of contracted-out employment 9.10

Fixed rate revaluation 11.55Forms

COSR forms Appendix 1Guaranteed Minimum Pension (GMP)

Annual reconciliation check 1.356 April 1978 to 5 April 1997 2.12Calculating 5.1Earnings factors 5.6Revaluing 6.1Anti-franking legislation requirements 7.1Buying back rights to other schemes 8.1Transferring rights to other schemes 9.1Splitting rights 9.63Buying out rights 10.1Transferring bought-out rights 10.12Buying back rights into the state scheme 11.40Payment of the GMP is deferred 12.9Statements 13.1Buying-out 13.27Dual GMP Calculation Facility 14.1Early leaver GMP Appendix 4Retirement GMP Appendix 4

166

Member’s GMP Appendix 4Inflation-proofing the GMP Appendix 4Calculation of GMP increments where payment of GMP is deferred past SPA Appendix 4Examples of Dual GMP calculations Appendix 6

Holding Companies 4.38How membership of a COSR scheme or COSR part of a COMB scheme affects state additional pension Appendix 5Incentive paymentsInflation-proofing the pension 12.18Inflation-proofing of the GMP Appendix 4Inland Revenue National Insurance Contributions Office 1.5Internal transfer(s):

between parts of a COMB scheme 11.21of membership and accrued GMP and/or Post ‘97 COSR Rights from the COSR part to the active COMP part of the same COMB scheme 11.24of membership only from the COSR part to the active COMP part of a COMB scheme 11.26

Leaflets Appendix 7Limited Revaluation Premium (LRP)

Calculating 6.11Responsibility for paying 6.21Time limits 6.24Limited rate revaluation 11.55Calculation Appendix 3

Maternity leave 4.40Married women and widows paying reduced-rate contributions 4.55Member’s GMP Appendix 4Notifying termination

Notifying Services to Pensions Industry 4.1Responsibility 4.4Notification not required 4.5Time limits 4.6Guidelines 4.8Employee goes abroad 4.12Concurrent Contracted-out employments 4.16Deferred payment of contributions 4.26Change of ECON 4.32Holding companies 4.38Maternity leave 4.40Change in method of preservation 4.51Change of RPA 4.53Married women and widows paying reduced-rate contributions 4.55 Employment within a COMB scheme 11.13

Occupational Pensions Regulatory Authority (OPRA) 1.8Overseas scheme/arrangement 10.22Pension sharing on divorce

Background 15.1, 15.2, 15.3, 15.4Calculation Services 1.18, 1.19, 1.22, 15.12, 15.13, 15.14Contracted-out Deduction 15.20Pension Sharing on Divorce Notification 15.15, 15.16, 15.17, 15.18, 15.19Safeguarded Rights 15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11Statements of GMP liability 6.7, 6.20, 6.27, 6.33, 9.31, 10.10, 11.37, 11.58, 13.5,

13,7, 13.11, 13.12, 13.15, 13.21, 13.22, 14.5, 15.21PensionsPension provisions for: 2.1

A scheme member 7.4Widows or widowers 7.6

Post ‘97 COSR rightsBuying back into the state scheme 8.1, 11.40Transferring to other schemes 9.1Splitting 9.63

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Transferring bought-out rights 10.12Only have accrued in the COMB scheme 11.43, 11.44Buying-out 11.78

Post ‘97 GMP RightsBuying back into the state scheme 8.1, 11.40Transferring to other schemes 9.1Splitting 9.63Transferring bought-out rights 10.12Only have accrued in the COMB scheme 11.43, 11.44Buying-out 11.78

Previous GMP transfer:with Section 148 revaluation 11.54with fixed or limited rate revaluation 11.55

Protected rights Protected rights have accrued in the COMB scheme 11.44Protected rights statements/notices 13.24

Providing a pension at retirement or deathGeneral 12.1Effect on State Retirement Pension 12.3Providing a pension 12.4Payment of the GMP is deferred 12.9Trivial Commutation 12.14Inflation-proofing the pension 12.18Widow and widower inheritance provisions 12.22

Quick Reference Guide Appendix 8Reduced-rate contributions

Married women and widows 4.55Responsible Paying Authority (RPA) 4.53Retirement GMP Appendix 4Revaluing GMP

Background 6.1Method of revaluation 6.5Calculating the LRP 6.11Calculating the MLI 6.13Notifying Services to Pensions Industry 6.19Responsibility for paying an LRP 6.21Time limits for paying LRPs 6.24Using a fixed rate 6.28

Revaluation factors Appendix 3Revaluation of earnings factors 5.18Safeguarded Rights 15.5, 15.6, 15.7,

15.8, 15.9, 15.10, 15.11Schemes operating an active COMP and COSR part 11.3Section 148 revaluation 11.54State retirement pension 12.3Tables Appendix 3Termination of Contracted-out Employment

Terminated 3.1Not terminated 3.2Change of employer 3.8Special cases 3.10Contribution liability 3.21

Tracing services 1.42Transferring bought-out GMP and/or Post ‘97 COSR Rights 10.12Transfer of:

rights accrued in a COMB scheme to another COMB, COSR, COMP/COMPSHP or APP/APPSHP scheme 11.48rights accrued in a COMB scheme to the active COMP part of another COMB scheme or COMP/COMPSHP scheme 11.63rights accrued in a COMB scheme to an APP/APPSHP scheme 11.70

Transfer to:a COSR scheme or active COSR part of a COMB scheme or Section 53 Salary Related scheme 9.19a COMP or active COMP/COMPSHP part of a COMB scheme or Section 53 Money Purchase scheme 9.36the active COMP or COSR part of a COMB scheme 9.43an APP/APPSHP scheme 9.46, 10.19an overseas occupational pension scheme or overseas arrangement other than one which isor was contracted-out and still under the financial supervision of Services to Pensions Industry 9.52, 11.76an overseas scheme which is or was contracted-out and is still under the financial supervision of Services to Pensions Industry 9.61a COSR scheme or the active COSR part of a COMB scheme 10.15a COMP scheme or the active COMP part of a COMB scheme 10.17an overseas scheme or an overseas arrangement 10.22

Transfer Premium (TP)When can a TP be paid? 8.51Time limits 8.56Calculating 8.60Calculation Appendix 3

Transferring GMP/COSR ‘97 rights to other schemesEmployee’s right to a transfer value 9.1Employee’s rights on termination of Contracted-out employment 9.10What schemes can ‘97 rights be transferred to? 9.13Consent to a transfer 9.15Transfer to a COSR scheme or active part of a COMB scheme or Section 53 Salary Related scheme 9.19Transfer to a COMP/COMPSHP scheme or active COMP part of a COMB scheme or Section 53 Money Purchase scheme 9.36Transfer to the active COMP/COMPSHP or COSR part of a COMB scheme 9.43Transfer to an APP/APPSHP scheme 9.46Transfer to an overseas occupational pension scheme or overseas arrangement other than one which is or was contracted-out and still under the financial supervision ofServices to Pensions Industry 9.52Transfer to an overseas scheme which is or was contracted-out and is still under the financial supervision of Services to Pensions Industry 9.61Splitting the GMP and/or Post `97 COSR rights 9.63Incoming transfer from a COMP/COMPSHP or APP/APPSHP scheme 9.71

Short service benefit 7.8State pension age (SPA)

Employee leaves Contracted-out employment before SPA 13.5Statement issued when employee, or former employee, reaches SPA 13.11

StatementsGMP statements 13.1Employee leaves contracted-out employment before SPA 13.5Statements issued when employee, or former employee, reaches SPA 13.11Widow’s entitlement 13.15Widower’s entitlement 13.21Protected rights statements/notices 13.23Buy-out of a GMP 13.26

Statements/notifications issued Appendix 2Widows/Widowers

Widow’s entitlement 13.15Widower’s entitlement 13.21Widows paying reduced-rate contributions 4.55Widows or widowers benefit is protected 7.5Pension provision for widows and widowers 7.6Deductions from the AP for the widow or widower Appendix 5

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This leaflet gives general guidance only and should not be treated as a complete and authoritative statement of the law.

Leaflet CA 14 from June 2002. Prepared by Inland Revenue

National Insurance Contributions Office, Publications,Newcastle upon Tyne.

Printed in the UK.Available on the Internet.

Our address is: www.inlandrevenue.gov.uk

termination of contracted-out employment manual

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