appropriate personal pension plan

A pension plan in which employer and employee pay full rate National Insurance contributions equivalent to the employee contracting into S2P. This rate will be greater than the rate paid by contracting out of S2P.

The difference between these rates, the contracted-out rebate, is paid by the Government into a scheme known as an appropriate personal pension plan which buys pension benefits at retirement age known as protected rights. Provided an employee qualifies, incentive payments may also be paid by the Government into the scheme.

The contracted-out rebate plus any incentive payments are known as minimum contributions. Payment of minimum contributions into an appropriate personal pension plan results in a reduction of S2P benefit at retirement age as though the employee had contracted out through a final salary related scheme.