Contracting Out

It is possible to mobilise your stakeholder pension to contract out of the State Second Pension.

The State Second Pension – formerly called the State Earnings-Related Pension Scheme (SERPS) – is for anyone in work who earns above the lower earnings limit.

If you feel you would prefer to contract out of the second arrangement, then it is up to you to construct a replacement, in combination with a private pension arrangement (just like a normal stakeholder pension).

National insurance rebates and tax relief would then be paid into your stakeholder pension(you would still continue to pay NI contributions in full).

Whether you should ultimately contract out will depend largely on your age, and on how much you earn (anyone opting out would still be entitled to the basic state pension).
It might pay you to take advice from an independent financial adviser or complete our quick enquiry form for more information.

The cost to you may be higher initially, but lower in the long-term. For anyone who is comfortable with taking higher risk stock market investments over the long term,

For information on stakeholder tax approval and contracting-out, call the Inland Revenue Audit and Pension Schemes Office helpline on 0115 974 1777, Monday to Friday, 8am to 5pm.