Subsection (1): section 42B(2) of the Pension Schemes Act 1993 enables the Secretary of State to make an order determining the reduced rate of National Insurance contributions payable by members of contracted-out money purchase occupational pension schemes.
The reduced rates reflect the cost of providing members with benefits of an equivalent value to the SERPS benefits they are giving up. This subsection allows different rates to be specified according to whether the money-purchase contracted-out scheme is registered as a stakeholder scheme or not. It could be used, for example, to allow the reduced rate of contributions to reflect any difference in costs between schemes that are stakeholder pension schemes and those that are not.
Subsection (2) provides a corresponding power to set different rates for members of appropriate personal pension schemes, depending on whether or not the scheme is registered as a stakeholder pension scheme.
Subsection (2)(b) allows different rates to be specified depending on when the member first joined the scheme. This would, for example, enable a different rate of rebate to be set for those who have already entered into an arrangement with a pension scheme before a specified date than for those who enter into a new contracted-out arrangement after that date.
Commentary on Sections Commentary Section 7: Reduced rates of contributions etc: power to specify different percentages