Contracted-Out Rebate Rates (Quinquennial Review)

Steve Webb Excerpts

Thursday 3rd February 2011 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Later today the Government will publish an order to set the contracted-out rebate rate for salary-related pension schemes for the tax years 2012-13 to 2017-18. The new rate will be 4.8% and will be shared in the following way: 3.4% for employers (secondary class 1 contributions) and 1.4% for employees (primary class 1 contributions).

Rebate rates for members of contracted-out pension schemes are reviewed at intervals of up to five years. It has been five years since the last review. The rebate is expected to reflect the cost of providing the benefits given up by individuals contracted out of the additional state pension.

The Government Actuary has produced a report presenting three possible approaches to setting the rate. The Government have adopted the rate that was calculated using the Government Actuary’s “best estimate” approach.

The full report of the Government Actuary will be published alongside the order, as will a report on the order by the Secretary of State for Work and Pensions in accordance with sections 42(1), 42B(1) and 45A(1) of the Pensions Act 1993.