In a written ministerial statement published in Hansard today, the Minister for Pensions and the Ageing Society (Angela Eagle) announced that contracting-out for defined contribution pension schemes is to be abolished from 6 April 2012. Individuals who are contracted-out into a Defined Contribution pension scheme will be automatically brought back into the additional State Pension from this date.

This landmark in the troubled history of contracting-out is provided for by PA 2007 s.15. Although the cessation date had been widely anticipated, the industry will welcome the removal of uncertainty.

At the same time the DWP has published a 3-page factsheet for employers on the subject. This makes clear that following abolition from 6 April 2012, the special rules governing how protected rights benefits should be treated will be removed. Therefore, those benefits already accrued will cease to be 'protected rights' and can be treated the same as other pension benefits. They will be retained in the pension scheme unless a transfer request has been made and there will no longer be a need to track protected rights benefits already accrued separately.

Contracting-out certificates for defined contribution schemes will be automatically cancelled from the date of abolition: there will be no need to take action to surrender. Age-related rebates from HMRC will continue to arrive after 6 April 2012, in respect of earnings paid in the 2011/2012 tax year and also, where appropriate, for any late rebate payments in respect of tax years prior to this period. Consequently HMRC warns against any precipitate action to change payment systems. How transitional arrangements will work in practice is being developed with HMRC and employers will be advised, the factsheet says.

2010 Budget Day