Click here to go back to the SERPS Main pageThe State Earnings Related Pension Schemes (SERPS) was replaced with the State Second Pension (S2P) in April 2002. This change is intended to give low earners (currently less than £27,800 per annum for 2005/2006) a much better state pension than SERPS provided.
The State Second Pension (S2P) will for the first time be available to certain carers and people with long term illnesses or disabilities i.e. people who’s working lives have been interrupted or shortened. Any SERPS entitlement that has already been built up is protected both for those who have already retired and for those who have not yet reached state pension age. The earnings related part of the state pension is not available to the self-employed.
The State Second Pension works in a similar way to SERPS with increased state pension benefits for lower earners. The benefits from SERPS were based on the amount of earnings on which National Insurance was paid, at a flat rate of 20% between £4,264 and £32,760 for the 2005/2006 tax year (if retirement is after 2009/2010).
With the S2P scheme anyone earning less than £12,100 but more than £4,264 (tax year 2005/2006) will have their benefit calculated as if their income was £12,100. Furthermore any income above £12,100 but below £27,800 will obtain better combined benefits than from SERPS. Between £27,800 and £32,760 the percentage benefit remains the same.
Overall the new scheme provides far better benefits for lower earners without reducing the benefits for higher earners.
The State pension age when the benefits are payable is: