The biggest problem for pension savers is keeping up with the constant changes imposed by Government. The latest change affects savvy savers who decided to divert some of their National Insurance to their own pension pot in respect of the state second pension (S2P). As part of the proposed improvements to state pensions, contributions will no longer be paid to these contracted out plans. This will mean that you will get a reduced income from your private pension or company scheme.

Instead the money saved will be set aside to pay for an enhanced flat rate weekly pension for all. When the flat rate pension is introduced in a couple of year time this will provide ?140 per week for a full National Insurance record of 30 years. This is a marked improvement for anyone only in receipt of a basic state pension today but those who have already opted out, or contracted out of S2P are in limbo until further details are announced.

The Government has not yet decided how people who have contracted out will be treated when the new flat rate state pension is introduced, although one option is for the flat rate pension to be cut accordingly. So for every year of contracting out you would see a reduction of ?1.50 per week for example.

Anyone who has already retired is unaffected by the changes.

How does this affect your own pension pot now contributions have stopped?

Your pension pot remains invested and should continue to grow until you plan to take your benefits. As with any investment you should aim to maximise the returns and review regularly.

There is some good news with the end to contracting out as the Government has allowed greater flexibility. You can now hold all of your pensions in one plan and many providers have seen fit to make arrangements to integrate these plans with personal contribution plans. Potential benefits are an enhanced investment choice and lower charges. There is also more choice in how you take income from these plans, as there is no longer a requirement to provide for a spouse on death.

• Check pension statements for any contracted out pots, sometimes referred to as Appropriate Personal Pensions or rebate plans.
• Is the pension provider planning to consolidate the plans with other pension plans providing greater investment choice cost effectively?
• Consider transferring pension pots to an alternative service that will support the changes and provide an enhanced proposition.
• Review how you take income if you are shortly to retire.
• Be aware additional choice brings with it greater responsibility so ensure you make the best decision for your personal circumstances.
• Seek financial advice to ensure you benefit now that the goalposts have been moved again.