tributions for employees will continue to depend on the amount earned, but naturally, better pensions must mean higher contributions. At the time of publication the exact contribution rates and upper and lower earnings limits (see Part 5) from 6 April 1978 were not known. However, the employee's rate will not be more than 6 per cent of pay.
Women aged 60 or over and men 65 or over will cease to be liable for contributions.
Newly married women can no longer choose to pay reduced-rate con- tributions. However, some married women and widows may retain their right to pay at the reduced rate.
Inflation-proofing
Basic pension will keep up with the average increase in earnings or. prices-whichever is the higher.
Additional pension will be protected in two ways:
The earnings on which additional pension will be based will be revalued in line with the general movement of earnings from the year in which they were received up to the last tax year before entitlement to pension arises. The pension awarded will keep up with the average increase in prices.
Occupational pensions and contracting-out
The new State scheme will operate in partnership with a good occupational scheme—that is, one which provides:
A personal pension based on at least 1/80th of final salary or average revalued salary for each year of service. This personal pension must not be less than the guaranteed minimum pension (GMP). (This is calculated to match the additional pension provided by the State scheme for those not contracted-out.); and
A widow's pension which must be at least half the husband's GMP at the time of his death. (Any balance needed to bring this up to the full rate of additional pension will be made up by the State scheme.) GMP and widow's GMP will be protected by the State against price rises in the same way as for the State scheme additional pension.
If an employer operates such a scheme he can choose to contract-out his employees. They will then pay contributions to the State scheme at a rate which is 2 per cent lower than the normal rate on earnings falling between the lower and upper earnings limits. This is to take account of the fact that the occupational scheme is assuming responsibility for part of the additional pension.
Contracting-out: who decides? The decision rests with the employer, but he is obliged to give his employees and any trade union recognised by him a written notification of his decision and to consult that union. Finally, he must apply to the Occupational Pensions Board for permission to contract- out, and they will then ensure that the scheme complies with all the rules. If an employer's pension scheme is not contracted-out its benefits are additional to any State benefits. National insurance contributions are unaffected.
Further information: Leaflet NP30 (New pensions: what you pay and how you benefit); NP31 (New pensions for women).
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