Should table letter C be used for employees over state pension age who are still contributing to a contracted-out pension scheme?Friday, December 31st, 2010
Contracted-out employment starts at age 16 and ends when the employee reaches the state pension age. The flowchart on page 3 of the CA41 NICs Tables (for Table Letters B and C) is very specific. If an employee is at or above the state pension age table letter C must be used, even if the employee continues to make contributions to a contracted-out pension scheme.
The table letter must be changed to C from the first payday on or after the employee’s birthday. The employee is no longer required to pay any NICs at all, and the employer is required to pay NICs at the full not contracted-out rate (i.e. the same as Table Letter A), not at any contracted-out rate.
The state pension age is currently 65 for men and, between April 2010 and November 2018, it is increasing gradually from 60 to 65 for women. Great care is needed, therefore, to ensure that the change of table letter for women is made at the correct time.
An employee’s table letter should not be changed to C unless the employer is satisfied that the employee is actually at the state pension age. The employee must be asked to provide appropriate evidence. For example, the employee’s birth certificate or passport could be inspected and a copy retained. Alternatively, a CA4140 or CF384 Certificate of Age Exception, issued by the National Insurance Contributions Office, can be accepted as evidence.
If Table Letter C is used before the employee reaches state pension age, or a contracted-out Table Letter continues to be used after reaching that age, the employer is responsible for the shortfall in NICs deductions.