Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Contracting-out definition

What does Contracting-out mean? In pensions practice, contracting-out described the statutory option for an employee and their pension scheme to replace entitlement to the additional State Pension (SERPS/S2P) with scheme benefits, in return for reduced national insurance contributions and/or a National Insurance rebate paid to the scheme. Defined in UK social security and pensions legislation (notably the Pension Schemes Act 1993 and successors), it operated through: - salary-related (defined benefit) schemes that met the reference scheme test (and, for service to 5 April 1997, accrued guaranteed minimum pensions); and - money purchase (defined contribution) arrangements, including contracted-out money purchase schemes and appropriate personal pensions. Schemes did...

Transfers of contracted‑out salary‑related rights before 6 April 2016: Section 9(2B) rights and GMPs—consent, connected‑employer bulk and overseas transfers

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Practice notes

contracting-out on a salary-related basis (also known as DB contracting-out)

This was abolished on 6 April 2016. members of salary‑related schemes that were contracted‑out (COSR schemes) before abolition may have built up one of two forms of contracting‑out rights:

guaranteed minimum pensions (GMPs), being rights accrued before 6 April 1997
Section 9(2B) rights (also known as post‑1997 contracted‑out salary‑related rights or post‑1997 COSR rights), accrued on or after 6 April 1997

Collectively, this Practice Note refers to these as ‘contracted‑out salary‑related rights’ or, in short, ‘COSR rights’. For details of the legal regime for COSR rights after 6 April 2016, see Practice Note: Legal regime applicable to Section 9(2B) rights and GMPs from 6 April 2016.

Before abolition, the legislative requirements for transferring COSR rights were set out in the Contracting‑out (Transfer and Transfer Payment) Regulations 1996, SI 1996/1462 (the Contracting‑out Transfer Regulations), and were amended with effect from 6 April 2016 by the Pensions Act 2014 (Abolition of Contracting‑out for Salary Related Pension Schemes) (Consequential Amendments and Savings) Order 2016, SI 2016/200. As a consequence, the legislative requirements that apply when transferring COSR rights differ slightly depending on whether...

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Web page updated on 22/05/2026

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