Changes due to the end of contracting out

20 May 2015

Ending of Contracting Out

Briefing for Software Developers

Removal of the Temporary Scheme Contracted-out Number (SCON)

The facility to use the temporary SCON for employees who are contracted out, was withdrawn from 6th April 2015. Employers should ensure that they are using the correct SCON during this tax year. If they do not know their SCON they should contact their Pension Scheme Administrator.

Removal of the Upper Accrual Point and ending of Contracting out

Contracting out of the additional State Pension on a defined benefit (DB) basis will end on 5 April 2016. This means that from 6 April 2016 employees will automatically be brought back into the State Pension scheme and will no longer be able to use a contracted-out salary related (COSR) occupational pension scheme to contract out of the State Scheme.

  • Employers will not be able to use their COSR occupational pension scheme to contract employees out of the new State Pension scheme. Employers and their agents will no longer be required to provide Employers Contracting-out Number (ECON) and SCON details on Full Payment Submission (FPS) for tax years commencing 6 April 2016 and onwards.
  • Employees may, depending on their level of earnings, start to accrue entitlement to the new State Pension instead.
  • Employers and their agents will no longer be required to report NI earnings between the Primary Threshold (PT) and Upper Accrual Point (UAP) & UAP to Upper Earnings Limit (UEL).
  • Employers and their agents will be required to report NI earnings between the PT to UEL as they did prior to 2009.
  • Both employees and employers will no longer be eligible for the contracted out NIC rebate (1.4% & 3.4%).
  • There will be one less column to complete on P11’s, P60’s and P14’s. Forms will be updated and can be found electronically on Basic PAYE Tool (BPT) or the Employers Order-line can send a disc. A paper version will be available from the Employers Order-line if the employer is exempt.
  • Revised technical specifications will be issued in June 2015.

National Insurance Categories

Contracted out National Insurance tables/categories D, E, K, I, L, N, O and V will be replaced by Standard National Insurance tables/categories A, B, J, M, P, Q, R, T, Y and Z.

Please note contracted out National Insurance tables/categories I, K and V will operate for the 2015-16 tax year only for individuals who are aged under 21 and are in contracted out employment.