What is S2P and Contracting Out?Contracting OutS2P stands for the State Second Pension. This is a top-up pension to your Basic State Pension, based on the amount you earn during your working life. It is funded by some of your own and your employer's National Insurance contributions. This replaced the State Earnings Related Pension Scheme (state second pension s2p) in April 2002.Some people might be better off by having these contributions paid into their own stakeholder pensions instead. This is known as 'contracting out'. You can contract out using your Stakeholder Pension application form or contacting the insurance company once your plan is set up.If you are thinking of contracting out, you need to decide whether the National Insurance rebate paid into your stakeholder pension will provide you with a better pension than the additional state pension would. If you do decide to contract out of the State Second Pension, you will still be entitled to any state second pension s2p or State Second Pension that you built up before you contracted out. |