For many years investors have been able to contract out of the State Second Pension (S2P) and previously the State Earnings Related Pension Scheme (SERPS)  by receiving a rebate of their national insurance into their own personal pension.

The Government propose to abolish this facility with effect from 6 April 2012. This will mean that if you have been using a personal pension policy to receive these rebate payments, these contributions will cease. Your pension fund will continue to be invested by your chosen Insurance Company and hopefully will grow  in value over the years.

 The benefits  from such a personal pension will be available at any time between age 55 and age 75. In the past the benefits which had been created by the Government rebates, were known as “Protected Rights” and if you were married you were obliged to use your pension fund to purchase a retirement income which continued  at a rate of 50% to your spouse should you die first. This rule will be abolished from 6 April 2012, so even if you are married at the time that you take the benefits you will not be forced to buy a retirement income which continues to your spouse.

If you have a policy which you have used for contracting out and are confused about the changes, do please get in touch.