Explanatory note

These Regulations amend the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) so that regulation 52A, which provides for the return of National Insurance contributions paid in excess of the annual maximum prescribed in regulation 21, takes account of the introduction of the “upper accrual point” (“UAP”).

The UAP was introduced for England, Wales and Scotland by the Pensions Act 2007 and the National Insurance Contributions Act 2008 and for Northern Ireland by the Pensions Act (Northern Ireland) 2008 and the Pensions (No. 2) Act (Northern Ireland) 2008. The UAP is a new benefit related threshold which is used to calculate entitlement to state second pension for the tax year 2009-10 onwards. It also operates as a limit on the amount of earnings on which contracted-out rebates are payable. Prior to the introduction of the UAP employees who were contracted-out of the state second pension scheme were entitled to a rebate on their earnings up to the Upper Earnings Limit (UEL). From the 6th April 2009 contracted-out rebates are available on earnings up to the UAP. As a result of the introduction of this new threshold a technical change is needed to the excess refund provision to take account of the UAP in excess refund calculations.

Regulation 2 amends Rules 2 and 3 in paragraph (6) of regulation 52A; these Rules are used to calculate a refund if a contributor has at least one contracted-out employment or holds an appropriate personal pension. The amended Rules now take account of the UAP threshold in excess refund calculations for the tax years 2009-10 onwards ensuring that any contributions paid in excess of an individual’s personal annual maximum can be refunded.

A full Impact Assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.