The option to contract-out of the State Second Pension (S2P) will come to an end in 2016 when the Single State Pension is introduced. Currently it is only possible to contract-out of S2P (previously SERPS) for schemes providing ‘defined benefits’ above a certain minimum level. Prior to April 1997 the minimum level of benefit the DB scheme had to provide was known as a Guaranteed Minimum Pension (or GMP), which still forms part of many members’ benefits.
When contracting-out ends in April 2016, HM Revenue and Customs (HMRC) will no longer track contracted-out rights and will issue closure schedules to schemes so they can compare these against GMP amounts held on scheme records. This is known as a GMP reconciliation.
Following this, from December 2018 HMRC is planning to send individuals information about their contracting-out history.
As a result of the above, all schemes will need to reconcile their GMPs with those held on HMRC’s records by December 2018.
To find out more information on this please read our latest briefing note below.