The government this week passed legislation which officially ended contracting out of defined contribution (DC) pension schemes from April 2012.
The practice, which involves taking the state second pension and investing it in private pension funds, was recommended for abolition by the Turner Commission.
Contracting out reached its peak in 1992 with 4.7 million people using it, but this fell to 1.9 million members in 2008/09.
Contracting out of defined benefit (DB) schemes is also expected to be banned in the future although as legislation stands it will still be allowed after 2012.
Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: "Ending contracting out will simplify the pensions landscape but it does take away an option from those who prefer to take control of their own retirement funds rather than trusting tomorrow's governments to provide for them."
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