Should table letter C be used after state pension age if the employee is still contributing to a contracted-out pension scheme?

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

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, even if the employee continues to make contributions to a contracted-out pension scheme.

The state pension age is currently 60 for women and 65 for men. Between April 2010 and April 2020, the state pension age for women will move in steps from 60 to 65, so great care will be needed to ensure that the change of table letter occurs at the correct time.

An employee's table letter should not be changed to C unless the employer is convinced 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 should 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 and retained as evidence.

If Table Letter C is used before the employee reaches state pension age, or a contracted-out Table Letter continues to used after reaching that age, the employer is responsible for the shortfall in NICs deductions.

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