Pilkington Superannuation Scheme

…is Contracting Out?

A pension scheme is contracted out where it provides benefits in place of the State second tier pension, the State Earnings Related Pension Scheme (SERPS).

An individual can be contracted out through an occupational pension scheme or via a personal pension. Generally the employer decides if an occupational scheme is to contract out. In the case of a personal pension it's the policyholder's own decision.

The basis of contracting out is changed from time to time by the Government.

The Pilkington Superannuation Scheme is a contracted-out scheme.

…does this mean to me?

Members of the Pilkington Superannuation Scheme pay less National Insurance contributions than non-members and members of contracted-in schemes. The reduction is currently 1.6% of 'Band Earnings'. 'Band Earnings' are your earnings between the Lower Earnings Limit (LEL) for National Insurance purposes 2003/2004 of £4,004 and Upper Earnings Limit (UEL) of £30,940.

Members will still be eligible to receive the basic State pension in addition to their Scheme pension, subject to meeting the State's contribution conditions.

…does it work?

Currently one way of contracting out (the one used for the Scheme) is to provide at least a certain minimum standard of benefit under a scheme's rules.

This minimum level of benefit has to be at least equal to the benefits that would be provided from a hypothetical scheme, known as the Reference Scheme test.