Social Security Pensions Act 1975

Arrangements for contracting-out E+W+S

30 Contracted-out employment. E+W+S

(1) Subject to the provisions of this Act, the employment of an earner in employed earner’s employment is contracted-out employment in relation to him during any period in which he is under pensionable age and—

(a) his service in the employment is for the time being service which qualifies him for [F1 a guaranteed minimum pension provided by] an occupational pension scheme [F2 or his employer makes minimum payments in respect of the earner’s employment to a money purchase contracted-out scheme]; and

(b) the scheme is a contracted-out scheme in relation to that employment; and

(c) there is in force a certificate, issued by the Occupational Pensions Board and known as a “contracting-out certificate”, that the employment is contracted-out employment by reference to the scheme.

[F3 (1A) The minimum payment in respect of an earner for any tax week shall be the rebate percentage of so much of the earnings paid to or for the benefit of the earner as exceeds the lower earnings limit for the tax week but does not exceed the upper earnings limit for it; and in this subsection “rebate percentage” means the percentage arrived at by adding—

(a) the percentage by which for the time being under section 27(2) above the contracted-out percentage of primary Class 1 contributions is less than the normal percentage; and

(b) the percentage by which for the time being under that subsection the contracted-out percentage of secondary Class 1 contributions is less than the normal percentage.

(1B) The references to the upper and lower earnings limits in subsection (1A) above are references, in the case of an earner who is paid otherwise than weekly, to their prescribed equivalents under [F4 sections 6(1) and 8(3) of the Contributions and Benefits Act].

(1C) Regulations may make provision—

(a) for the manner in which, and time at which or period within which, minimum payments are to be made;

(b) for the recovery by employers of amounts in respect of the whole or part of minimum payments by deductions for earnings;

(c) for calculating the amounts payable according to a scale prepared from time to time by the Secretary of State or otherwise adjusting them so as to avoid fractional amounts or otherwise facilitate computation;

(d) for requiring that the liability in respect of a payment made in a tax week, in so far as the liability depends on any conditions as to a person’s age on retirement, shall be determined as at the beginning of the week or as at the end of it;

(e) for securing that liability is not avoided or reduced by a person following in the payment of earnings any practice which is abnormal for the employment in respect of which the earnings are paid;

(f) without prejudice to sub-paragraph (e) above, for enabling the Secretary of State, where he is satisfied as to the existence of any practice in respect of the payment of earnings whereby the incidence of minimum payments is avoided or reduced by means of irregular or unequal payments of earnings, to give directions for securing that minimum payments are payable as if that practice were not followed;

(g) for the intervals at which, for the purposes of minimum payments, payments of earnings are to be treated as made; and

(h) for this section to have effect, in prescribed cases, as if for any reference to a tax week there were substituted a reference to a prescribed period.]

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F5

(3) Any contracting-out certificate for the time being in force in respect of an employed earner’s employment shall be conclusive that the employment is contracted-out employment.

(4) Regulations shall provide for the determination by the Board of any question whether an employment is to be treated as contracted-out employment or as to the persons in relation to whom, or the period for which, an employment is to be so treated.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F6

Textual Amendments

F1 Words substituted (with effect from 1.11.1986) by Social Security Act 1986 (c. 50), Sch. 10, para. 15

F2 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2 para. 4(a)

F3 S. 30(1A)–(1C) inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 4(b)

F4 Words substituted by Social Security (Consequential Provisions) Act 1992 (c. 6), Sch. 2, para. 25

F5 S. 30(2) repealed by Social Security Act 1986 (c. 50), Sch. 11

F6 S. 30(5) repealed by Employment Protection (Consolidation) Act 1978 (c. 44), Sch. 17

31 Contracting-out certificates. E+W+S

(1) Regulations shall provide for the issue by the Occupational Pensions Board to employers of contracting-out certificates specifying—

(a) the employments which are to be treated, either generally or in relation to any specified description of earners, as contracted-out employments; and

(b) the occupational pension schemes by reference to which those employments are to be so treated.

(2) Regulations shall also provide for the cancellation, variation or surrender of any contracting-out certificate, or the issue of an amended certificate, on any change of circumstances affecting the treatment of an employment as contracted-out employment.

(3) Subject to the provisions of this Part of this Act, an employment otherwise satisfying the conditions for inclusion in a contracting-out certificate shall be so included if and so long as the employer so elects and not otherwise; and subject to subsection (4) below an election may be so made, and an employment so included, either generally or in relation only to a particular description of earners.

(4) Except in such cases as may be prescribed, an employer shall not, in making or abstaining from making any election under this section, discriminate between different earners on any grounds other than the nature of their employment; and if the Occupational Pensions Board consider that an employer is contravening this subsection in relation to any scheme they may refuse to give effect to any election made by him in relation to that scheme or cancel any contracting-out certificate held by him in respect of that scheme.

(5) Regulations may make provision—

(a) for regulating the manner in which an employer is to make an election with a view to the issue, variation or surrender of a contracting-out certificate;

(b) for requiring an employer to give a notice of his intentions in respect of making or abstaining from making any such election in relation to any existing or proposed scheme—

(i) to employees in any employment to which the scheme applies or to which it is proposed that it should apply;

(ii) to any independent trade union recognised to any extent for the purpose of collective bargaining in relation to those employees;

(iii) to the trustees and managers of the scheme and such other persons as may be prescribed;

(c) for requiring an employer, in connection with any such notice, to furnish such information as may be prescribed and to undertake such consultations as may be prescribed with any such trade union as is mentioned in paragraph (b)(ii) above;

(d) for empowering the Occupational Pensions Board to refuse to give effect to an election made by an employer unless they are satisfied that he has complied with the requirements of the regulations;

(e) for referring to an industrial tribunal any question whether an organisation is such a trade union as is mentioned in paragraph (b)(ii) above or whether the requirements of the regulations as to consultation have been complied with.

(6) Regulations may enable the Occupational Pensions Board to cancel or vary a contracting-out certificate where they have reason to suppose that any employment to which it relates ought not to be treated as contracted-out employment in accordance with the certificate and the employer does not show that it ought to be so treated.

(7) Except in prescribed circumstances, no contracting-out certificate and no cancellation, variation or surrender of such a certificate shall have effect from a date earlier than that on which the certificate is issued or the cancellation, variation or surrender is made.

(8) In this section “independent trade union” has the same meaning as in the M1 Trade Union and Labour Relations Act 1974 and “industrial tribunal” means a tribunal established under section 12 of the M2 Industrial Training Act 1964.

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F7

Textual Amendments

F7 S. 31(9) repealed by Employment Act 1980 (c. 42), Sch. 2

Marginal Citations

M1 1974 c. 52.

M2 1964 c. 16.

32 Contracted-out schemes. E+W+S

(1) An occupational pension scheme is a contracted-out scheme in relation to an earner’s employment if it is for the time being specified in a contracting-out certificate as a scheme by reference to which that employment is contracted-out employment; and references to the contracting-out of a scheme are references to its inclusion in a certificate as aforesaid.

(2) Subject to the provisions of this section, an occupational pension scheme can be contracted-out in relation to an earner’s employment only if—

(a) it complies in all respects with sections 33 to 41 below in respect of [F8 guaranteed minimum pensions] for the earner and his widow and of the other matters there mentioned or, in such cases or classes of case as may be prescribed, with those sections as modified by regulations; and

(b) the rules of the scheme applying to the [F8 guaranteed minimum pensions] are framed so as to comply with the requirements of any regulations prescribing the form and content of rules of contracted-out schemes and with such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Occupational Pensions Board as a condition of contracting-out, either generally or in relation to a particular scheme.

[F9 or it satisfies subsection (2A) below.]

[F10 (2A) An occupational pension scheme satisfies this subsection only if—

(a) the requirements imposed by or by virtue of Schedule 1 to the Social Security Act 1986, modified under sub-section (2B) below, are satisfied in its case;

(b) it complies with section 40(1) below; and

(c) the rules of the scheme applying to protected rights are framed so as to comply with the requirements of any regulations prescribing the form and content of rules of contracted-out schemes and with such other requirements as to form and content (not inconsistent with regulations) as may be imposed by the Occupational Pensions Board as a condition of contracting-out, either generally or in relation to a particular scheme.

(2B) The modifications of Schedule 1 are—

(a) that for the references to a personal pension scheme there shall be substituted references to an occupational pension scheme;

(b) that for the references in paragraph 5 to minimum contributions there shall be substituted references to minimum payments and any payments by the Secretary of State under section 7 of the Social Security Act 1986;

(c) that for paragraph 7(2) there shall be substituted—

“(2) The rules of the scheme may provide that a member’s protected rights are his rights under the scheme which derive from the payment of minimum payments (within the meaning of the Social Security Pensions Act 1975) together with any payments by the Secretary of State to the scheme under section 7 of this Act in respect of the member and any rights of the member to money purchase benefits which derive from protected rights (within the meaning of the Social Security Pensions Act 1975) under another occupational pension scheme or protected rights under a personal pension scheme which have been the subject of a transfer payment and such other rights as may be prescribed.”

(d) that in paragraph 9—

(i) for the reference to an occupational pension scheme there shall be substituted a reference to a personal pension scheme; . . . F11

(ii) for the reference to a personal pension protected rights premium there shall be substituted a reference to a contracted-out protected rights premium; and

[F12 (iii) for the references in sub-paragraphs (3)(a) and 7(a)(i) to the date on which the member attains pensionable age there shall be substituted a reference to a date not earlier than that on which he attains the age of 60 nor later than that on which he attains the age of 65; and]

(e) that paragraph 10 shall not apply to public service pension schemes.

(2C) A contracting-out certificate shall state whether the scheme is contracted-out by virtue of subsection (2) or subsection (2A) above; and where a scheme satisfies both of those subsections the employers, in their application for a certificate, shall specify one of the subsections as the subsection by virtue of which they desire the scheme to be contracted-out.

(2D) A scheme which has been contracted-out by virtue of one of those subsections may not become contracted-out by reason of the other, except in prescribed circumstances.]

(3) Where by any provision of this Part of this Act the contracting-out of a scheme in relation to an employment depends on the satisfaction of a particular condition, continued contracting-out of the scheme shall be dependent on continued satisfaction of the condition; and if the condition ceases to be satisfied, that shall be a ground (without prejudice to any other) for the cancellation or variation of the contracting-out certificate.

(4) A contracting-out certificate in respect of any employment may be withheld or cancelled by the Occupational Pensions Board notwithstanding that the relevant scheme is one that they would otherwise treat as proper to be contracted-out in relation to all earners in that employment if the Board consider that there are circumstances . . . F13 which make it inexpedient that the employment should be or, as the case may be, continue to be, contracted-out employment by reference to the scheme.

(5) Where in relation to an earner’s employment there are in force two or more occupational pension schemes none of which can by itself be a contracted-out scheme, the Board may if they think fit treat them for contracting-out purposes as a single scheme.

(6) It is hereby declared that nothing in this Part of this Act precludes an occupational pension scheme from providing benefits that are more favourable than those required for contracting-out purposes.

[F14 (7) An occupational pension scheme which—

(a) at any time before the coming into operation of the first regulations made under paragraph (a) of subsection (2) above did not satisfy that paragraph; but

(b) would have satisfied it if those regulations had then been in operation;

shall, for the purpose of determining whether the scheme satisfied that paragraph, be treated as if those regulations had been in operation at that time.]

Textual Amendments

F8 Words substituted (with effect from 1.11.1986) by Social Security Act 1986 (c. 50), Sch. 10, para. 16(a).

F9 Words inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 5(a)

F10 S. 32(2A)–(2D) inserted (with effect from 6.4.1988) by Social Security Act 1986 (c. 50), Sch. 2, para. 5(b)

F11 Word repealed (with effect from 13.7.1990) by Social Security Act 1990 (c. 27), Sch. 7

F12 S. 32(2B)(d)(iii) inserted by Social Security Act 1990 (c. 27), Sch. 4, para. 6(1), with effect from 17.5.1990 by virtue of para. 6(2) Social Security Act 1990.

F13 Words repealed by Social Security Act 1986 (c. 50), Sch. 10, para. 16(b)

F14 S. 32(7) added by Social Security and Housing Benefits Act 1982 (c. 24), Sch. 4, para. 20

Modifications etc. (not altering text)

C1 S. 32(2) has effect (with effect from 27.7.1987) in relation to personal pension schemes as modified by S.I. 1987/1116, reg. 3(1)

C2 S. 32(2)(a) to be construed (with effect from 6.4.1988) as if reference to “widow” included reference to widower (and with consequential modification) by virtue of Social Security Act 1986 (c. 50), s. 9(4)(b).