Not sure personally, but I guess you have to pay off the remaining months on your contract and pretty much close it and start a new 1. Which is a total waste in my opinion as your then paying for months and allowance your never going to get!. But guess it gives better ease to choose a new phone and tariff.
Some providers I gather also charge an early upgrade fee which based on the handset value and tariff dictates the early upgrade fee. This however, in my experience can sometimes be more than paying off the remainder of the contract itself depending on the handset you want.