DC contracting-out certificates will be cancelled with effect on and from 6th April 2012 and members will be automatically contracted in to S2P from that date. At the same time, existing restrictions (for example, compulsory provision of survivor’s benefits) will no longer apply to rights already accrued.
This has prompted fears that transfers of contracted-out final salary benefits into non-contracted out (i.e. all) money purchase schemes would no longer be possible. However, legislation has now been published which specifically allows such transfers to be made after 6th April 2012, and these may become more popular given new income drawdown provisions.
One of the key aspects of this change is that trustees must inform their members of the abolition of DC contracting-out and its consequences either in the 12 months before 6 April 2012 or as soon as practicable thereafter.