Contracted out/contracted in definition

What does Contracted out/contracted in mean?

A pension scheme was contracted-out where it provides certain benefits in place of the state second pension. These schemes paid lower National Insurance contributions. Members were contracted out if they were in employment that was contracted out by reference to either an occupational pension scheme or they had elected to contract out using a personal pension plan.

A personal pension plan that was contracted out was known as an appropriate pension scheme for these purposes. A pension scheme was commonly referred to as contracted in where it provided benefits in addition to SERPS or the state second pension. Strictly speaking, such a scheme was better expressed as an integrated scheme because there was no procedure for contracting in to the state second pension.

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