Contracting Out

Background 

Since the 6 April 1978, members of the LGPS paid a reduced rate of national insurance contribution by virtue of being "contracted out" of the State Earnings Related Pension Scheme SERPS - known more recently as the State Second Pension or S2P.

This meant that instead of paying full national insurance contributions and getting both the basic state pension and the 2nd state pension, LGPS members paid a reduced rate but only got the basic state pension.

However; The government changed the way state pensions are earned. From 6 April 2016 they introduced a single flat rate pension for everyone. Although to get the full amount you would have to pay the full national insurance amount for some time. For details please see the link to the state pension website.

Going forward

As a result of this change to the state pension the government announced that it was ending the option for pension schemes to be contracted out of the state pension scheme. This means that from 6 April 2016, members of the LGPS will pay the full rate of national insurance contributions. The amount extra that you have to pay will depend on your salary. Below are some example increases:

Earnings (monthly)        Estimated Increase

£1,250                                   £11.00

£2,250                                   £25.00

£3,750                                   £45.00

It is important that you understand how much state pension that you will receive and when you will receive it. It is important that you understand how much state pension that you will receive and when you will receive it. Please look at the government website using the following link: https://www.gov.uk/state-pension/overview