05: The contracting out decision - defined contribution schemes

The considerations for defined contribution scheme contracting out are very similar to those for personal pensions. The combined level of rebates and NIC savings are normally lower, but this is mainly because unless your earnings exceed £31,800 (in 2009/10) you will still accrue some S2P benefit.

Schemes normally allow the member to elect not to be contracted out, although there may not be an option to reverse that election. Age is often a determining factor: rebates are currently capped from age 49 (49 in 2010/11). Contracting out via defined contribution schemes is likely to end from April 2012.
 
Many defined contribution schemes are not contracted out. This reflects the additional complexity of contracting out and the relatively unattractive level of rebates. If you are a member of such a scheme, you can use a personal pension to contract out, if you wish.Last Updated