Why would you get a letter for LEGAL downloading?? All the letters sent out were either warnings by VM in conjunction with the BPI for downloading MP3's on P2P or by Davenport-Lyons for downloading some games/porn/mp3's again on P2P...
The ONLY people getting letters they don't deserve is probably piratebay seeding fake IP's which in the end is a godsend as it brings in probable doubt as to the offence
So stop panicing....
But as for data retention I presume you mean the link from IP to customer issue and not newsgroup retentions
This in reality could be kept for years...