A contracted-out pension scheme was contracted out of the additional State Pension (the State Second Pension or S2P, formerly known as SERPS). This meant that scheme members weren’t qualifying for additional benefits from the State Pension.
Both the scheme member and the employer paid a lower rate of National Insurance contributions. Contracting out for salary related schemes ended in April 2016. Contracting out on a 'money purchase' basis ended in April 2012.