The Pensions Act 2014 implements the new State Pension and also abolishes the contracted-out rebate from 6 April 2016. A consequence of this change is that employers will need to report less earnings information to HM Revenue and Customs (HMRC) when making Real Time Information (RTI) returns.
The changes will come into force from 6 April 2016 and apply to the contributions paid in the 2016 to 2017 and future tax years
With the abolition of the contracted-out rebate and the introduction of a flat rate pension there is no longer any need for the Upper Accrual Point to cap the State Second Pension calculation. Employers will no longer need to report the earnings up to the Upper Accrual Point separately. However, employers will still need to record earnings up to the Upper Earnings Limit as earnings above this level do not count for contributory benefits and employees pay the additional rate of NICs at 2% above this point.
Currently paragraph 7(13) of Schedule 4 and 4A of the Social Security (Contributions) Regulations 2001 (SSCR) provide that employers must report the following earnings information:
earning up to the Lower Earnings Limit
earnings between the Lower Earnings Limit and Primary Threshold earnings between the Primary Threshold and Upper Accrual Point earnings between the Upper Accrual Point and Upper Earnings Limit.
The SSCR will be changed from 6 April 2016 to provide that employers must report the following earnings information:
earning up to the Lower Earnings Limit
earnings between the Lower Earnings Limit and Primary Threshold earnings between the Primary Threshold and Upper Earnings Limit.
Changes are also being made to remove the need for employers to report the SCON (Scheme Contracted-out Number) and ECON (Employers Contracted-out Number) as they will no longer be needed once contracted-out contributions are abolished. Consequential changes are also needed to various regulations in the SSCR to remove references to contracted- out contributions and simplify the administrative rules for calculating whether someone has overpaid contributions and the refund due when the person was contracted-out.
Countdown Bulletin 13 3 February 2016
The latest edition of the Countdown Bulletin, published by the National Insurance Services, is aimed at the Pensions Industry on the subject of contacting out which comes to an end in April 2016.
Countdown bulletin 13 aims to provide additional guidance for pension scheme administrators on the ending of contracting-out in April 2016. This bulletin includes information about:
Scheme Reconciliation Service (SRS) Pension Forums November / December 2015
Guaranteed Minimum Pension (GMP) service - testers required Update on SRS from the Customer Relations (CR) Manager Department for Work and Pensions Update
CIPP webcast on the end of contracting-out 25 February 2016
The CIPP Policy Team has produced a short webcast which looks at what employers need to consider for the abolition of contracting out of a defined benefit pension scheme on 6 April 2016.
The webcast covers these key considerations for employers:
CIPP Policy News Journal
25/04/2016, Page 357 of 453
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