Skip to Main Content
Nilgosc


End to Contracting-Out from April 2016

The new single-tier State Pension

In April 2016 the government simplified the State Pension by replacing the existing basic State Pension and additional State Pension with the new single-tier State Pension.

At the same time the government ended ‘contracting-out’ of the additional State Pension, meaning you were ‘contracted back in’ to the State Pension and both you and your employer will start paying the standard rate of National Insurance contributions. 

What difference will this change make to me?

When contracting-out ended in April 2016, both you and your employer started to pay more National Insurance contributions. The previous employee National Insurance rebate was 1.4% of pay between certain thresholds. From 6 April 2016 you will no longer receive this rebate and will pay the standard rate of National Insurance. Below are some examples showing how much extra National Insurance contributions will be payable from 6 April 2016.

 Earnings  

National Insurance payable before 6 April 2016

National Insurance payable now

Difference

£15,000 per year /

£1,250 per month

£58.66 per month

£69.36 per month

£10.70 per month

£27,000 per year /

£2,250 per month

 £164.66 per month

 £189.36 per month

 £24.70 per month

£45,000 per year /

£3,750 per month

£307.65 per month

 £347.56 per month

 £39.91 per month

These examples assume you are over 21 years old and are based on the 2015/16 NI thresholds.

What is the single-tier State Pension?

It’s a new, simpler State Pension for people who reach State Pension age after 6 April 2016. As long as you have enough qualifying years you’ll get no less than you would have got under today’s rules.

The State Pension you ultimately get will take account of any time you paid National Insurance at a lower rate because you were contracted-out. When your National Insurance record is valued under the new rules, the government will make a deduction to calculate your ‘starting amount’. Any new contributions you make from April 2016 will be added to your new single-tier State Pension.

Can I get an estimate of my new State Pension?

If you’re due to reach State Pension age in the first five years of the new system, you can ask for an estimate of your new State Pension now.

This applies to you if you are a

  • woman born between 6 April 1953 and 5 August 1955, or a
  • man born between 6 April 1951 and 5 August 1955.

You can call the Future Pension Centre on 0345 3000 168 for a statement or get one online at: www.gov.uk/state-pension-statement

The service will be extended to younger people in the future.

You can get more details in this factsheet (PDF, 238KB) produced by the Department for Work and Pensions.


PDF files will open in a new window - Link to Get Adobe Reader