From 6 April 2012 the term 'protected rights' will be expunged from social security legislation. Protected rights will no longer exist: they become ordinary money purchase scheme benefits. Only salary related schemes can continue to be contracted-out after April 2012. Contracting-out certificates for defined contribution (DC) schemes will be automatically cancelled from the date of abolition. A C/O certificate that covers a contracted out mixed benefit scheme (COMBS) i.e. covering both defined benefit (DB) and DC sections will remain valid only for the DB section (the scheme will not be required to reapply for a new DB C/O certificate).

The essential legislation (coming into force on 6 April 2012) is in the 2007 and 2008 Pensions Acts:

s.15 and Sch 4 PA 2007 provide for the abolition of contracting-out on a defined contribution basis;

ss.106 and 145(2) PA 2008 permit the removal of all rules on accrued protected rights.

An announcement made by the previous Government on 12 March 2010 confirmed the abolition date and the new Government has agreed this date.

The primary legislation as usual requires statutory instruments to fill out the details and address the consequences of the basic policy decision. Accordingly, this week the DWP has published a 51-page consultation document containing draft legislation which seeks to amend or revoke a raft of existing legislation, in order to end contracting-out for all money purchase occupational and personal pension schemes. It also recognises the need to provide for a three-year 'transitional period' after 6.4.12 in order to allow for administrative 'tidying up'; in particular, to permit contracted out rebates to be paid or recovered after the abolition date, for periods prior to 6 April 2012.