State Second Pension (S2P)
The State Second Pension (S2P) was formerly known as the State Earnings Related Pension Scheme (SERPS).
Each individual has the option to contract-out of the S2P. By contracting out that proportion of your National Insurance contributions used to secure your second state pension is being rebated into a pension plan of your choice (i.e. a personal pension plan or group personal pension plan).
Contracting-out of the S2P is dependent on an individual's circumstances, however, the common most factor is that the individual believes the current State provision will be eroded by the time they retire. If you stay contracted-in, you are taking a political risk and you are making the assumption that the state is going to keep its promise on the S2P. If you contract-out, you are taking an investment risk as the value of your pension fund will be dependent on how well your pension fund performs over the longer term. Those contracted-out must review this decision periodically.