Shropshire County Pension fund

Taking care of your Local Government Pension in Shropshire

Contracting-Out and the New State Pension

Posted on by Admin-2

The State Pension is changing on the 6th April 2016, replacing the current two tiered State Pension with a single tier system.

The current State Pension consists of two parts; the basic State Pension and the Additional State Pension. Members of the LGPS currently pay a lower rate of National Insurance contributions because they contribute to the LGPS instead of the Additional State Pension. This is known as ‘contracting out’.

As the new State Pension will only have a single tier, contracting out will end and members will no longer receive the rebate for the amount of National Insurance contributions they pay towards the State Pension Scheme.

Therefore, from 6 April 2016 contracted out employees will pay an extra 1.4% in National Insurance contributions.

If you have any questions around the ceasing of Contracting Out, these should be referred to your employer.

For further information on the New State Pension and the end of Contracting Out visit the web page on State Pension Benefits.

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