I have just read this: Millions face tax hike in £6bn pension raid | This is Money. The bit that grabbed my attention is that this bit; "Last week's Budget document said this earnings-related add-on to the £97.65 a week basic payment will effectively be abolished to clear the way for a higher 'single tier' pension for all. But seven million Britons will lose generous National Insurance rebates worth up to £556 a year as a consequence. Currently, employees can opt out of the earnings-related State Second Pension (formerly called SERPS) and save into their company's final salary pension instead. This 'contracting out' trick slashes 1.6% off their National Insurance contributions. The discount is justified on the grounds of smaller state payouts in retirement. So instead of paying NI at the full 11% of income, the opt-outs pay 9.4%. The rebate is worth £556 a year maximum, according to pension consultants Towers Watson an extra sum they'll need to stump up when the £140 a week pension arrives." I have three not so simple questions; 1. Is AFPS defined as contracted out, as I believe it is? 2. Does this mean that we currently pay 9.4% NI and not 11%, also as I believe we do? 3. Does this mean that we are going to get humped for an effective 2.6% tax increase by Apr 2012 (1.6% from contracted out changes Apr 2012 and 1% from the Employees NI increase this year? Can anyone shed any light?