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Currently the Upper Earnings Limit (UEL) is the end point for earnings
related state second pension (S2P) accruals. A new lower end point, the
Upper Accrual Point (UAP) is to be introduced on 6 April 2009. The actual
level will be announced in January 2008. Only earnings up to the UAP will be
used to calculate S2P rights.
From 6 April 2009 employers and employees who have contracted out of the S2P
will receive contracted out rebates on earnings between the Lower Earnings
Limit (LEL) and the UAP. In other words, the rebates will be less than they
would have been. Employers and employees will pay NIC at the contracted in
rates of 12.8% and 11% respectively on earnings between the UAP and the UEL.
The UAP will be an additional complication for employers in annual
reporting.
Our view
The introduction of the UAP is just one change provided for by the
Pensions Act 2007. It has been introduced to achieve a simple flat rate
S2P by around 2030. |
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