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Employees who are in "contracted out" schemes of this type now receive a national insurance rebate of 1.4 per cent, which they will be denied from April 2016.
What lies at the root of the problem, according to Colquhoun and most observers, is the contracting out of park services that the Thatcher government brought in with its compulsory competitive tendering (CCT) scheme.
Contracting out is the mechanism by which workers opt to replace part of their state pension entitlement with private provision, such as a personal pension or company scheme.
Contracting out is another method of quickly expanding service availability.
Contracting out is essentially a supply side initiative.
Liu X [ 17] show that most contracting-out schemes do not consider capitation as the main option for paying providers.
Most of these workers are in the public sector, the great majority in the local government or NHS schemes, and until now they have benefited from an NI rebate because their schemes were contracted out of the additional or state second pension (formerly Serps).
However, most people will not qualify for the full pension, as their schemes were contracted out of the second state pension, and they paid lower National Insurance NII) contributions as a result.
This is because some will not have paid enough in national insurance contributions, and others will have contracted out of the state earnings related schemes for some of their working life.
Employers and employees who have contracted out of the state second pension scheme are currently entitled to a discount on their national insurance contributions.
bThis programme replaced short-term training and schemes for contracting out placement services (not displayed in the table).
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