Half of DB schemes unsure how to tackle end of contracting out

08 January 2015

A survey by Hymans Robertson shows that half of defined benefit schemes have not yet decided how they will deal with the end of contracting out. Contracting out ends in April 2016 as the single-tier state pension comes into effect, increasing the national insurance bill for both employers and employees.

The survey indicates that, as well as the 50% of undecided schemes, 15% planned to pay the additional costs and 11% felt unable to make changes. Only 10% of schemes said they planned to close their scheme to future accrual.

Hymans suggested a five-step process to prepare for the end of contracting out, including assessing the impact on the scheme, consulting with members and communicating any decisions before implementing changes.

The consultancy calculated the cost of NI contributions for a member on an annual salary of £20,000 as £484 from the employer and £199 from the member.