End of DB contracting out: ‘protected persons’ safe from statutory override

Print publication


Following a consultation in January 2013, the Government has now confirmed that ‘protected persons’ will not be prejudiced by the statutory override contained in the Pensions Bill, currently working its way through Parliament.

This override allows employers to offset the increased cost of National Insurance Contributions (NIC) (without trustee consent), which will follow as a result of the abolition of DB contracting out.

By way of background, ‘protected persons’ are employees of private sector employers that used to be employees of nationalised industries (for example, rail, electricity and coal) and who were members of their respective pension scheme.

Under legislation, ‘protected persons’ are entitled to benefit accrual on the same basis as those they enjoyed in the nationalised industries at the time of privatisation. The legislation restricts changes that private sector employers and trustees can make to their future pension benefits.

When the abolition of DB contracting-out comes into effect, ‘protected persons’, unlike their private sector counterparts, will not, without consent, be affected by changes made to schemes to offset the cost of increased NICs to the employer.