359.The system will operate slightly differently for occupational schemes in order to cater for the Pensions Industry’s desire to avoid disruption to employers. Occupational schemes will therefore continue to have their reduced rate of National Insurance contributions calculated on the same basis as now – that is, a uniform accrual rate of 20%.
360.In order to ensure that individuals in these schemes receive the extra help intended for low and moderate earners, an extended State Second Pension “top-up” will apply. It will work on the basis of calculating the State Second Pension that an individual would have received if he had not contracted-out, less a deduction equating to a pension derived from the rebate input (ie 20% of actual earnings).
361.This means that for people in occupational schemes, all the extra help is delivered by way of the State scheme, rather then partly through their scheme via the rebate, and partly through the state, as is proposed for personal pension schemes.
Part II: Pensions. Background – State Second Pension and Occupational and Personal Pensions Contracted-out Occupational Schemes