hope i dont sound thick but...

droylsdenpete

when you are contracted out how much is contracted out each week

CIS

Contracting out means you are paying in to a occupational or private pension instead of State 2nd pension, the amount you get back from the contracted out scheme depends on how much you pay in to the scheme and what its rate of return is.

EdInvestor

If you're contracted in, you pay your National Indurance contributions and the Government will eventually give you two state pensions - the basic state pension, plus a second one called State 2nd Pension (S2P) -formerly it was called SERPS.This second pension is earnings-linked, so different for every individual.

If you are contracted out, money from the NI is rebated by the Government into a private pension or company pension scheme which you have set up or joined to receive the money.This money is then invested and eventually when you retire, it will provide a "protected rights" pension instead of the S2P you would get if you were contracted in.

See the thread at the top on "Contracting out of surps" (sic) for more information on which to choose.

dunstonh

That thread could do with an update now that we know that you can take 25% tax free lump sum from contracted out funds but not contracted in. Plus the minimum age going to 55 (from 2010) whereas contracted in will continue to match state retirement age (whatever that ends up being when you get there).

DavidLaGuardia

Contracting out with a final salary occupational scheme is a completely different animal to that of personal pensions etc.
A personal arrangement means there is an age related rebate of NI contributions ito a fund of choice.
An occupational scheme that is contracted out must guarantee the equivalent level of benefits from SERPS/S2P for the relevant period as a minimum (which a good final salary scheme would do anyway) and in exchange for this both Employer and Employees have a small discount on their NI contributions.