State Pension & Contracting Out

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State Pension & Contracting Out

There are two parts to the State Pension:

• The Basic State Pension is what most people will be entitled to this and the amount you receive depends on the amount of National Insurance you have paid. So if you have breaks in your career, you may not get the full entitlement. By 2020, this will be payable from the age of 65 for everyone (prior to the 1995 Pensions Act, women could receive the pension from age 60 however women born after 6 April 1955 will receive it from age 65).
• The Additional State Pension (or S2P or SERPS) will apply if you are or have been an employee at any stage and have therefore paid Employees Class 1 National Insurance Contributions. If you have always been self-employed, you will not qualify for this benefit.

Opting out of state pension

It is possible to opt out of the additional State pension – this is known as contracting out – in this case, a rebate of your National Insurance Contributions will be invested in your pension scheme. See the links below for details of the types of scheme that this can be arranged through.

You can choose to contract back into the State scheme in the future if you wish.

Whether you would benefit from contracting out of the State scheme depends on your individual circumstances (such as your age, sex, earnings and the type of pension scheme, if any, you have). It is always a good idea to seek professional advice on this issue. If you would like to talk to a financial adviser, please complete our Quick Enquiry Form. We can also arrange for an estimate of how much pension you could be entitled to from the State when you retire.