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Additional State Pension

What is it?

Depending on your individual circumstances, you may be entitled to additional State Pension. This is also called the State Second Pension and used to be known as the State Earnings Related Pension Scheme (SERPS). As its name suggests, additional State Pension is paid in addition to the basic State Pension.

Up to April 2002, entitlement to SERPS was based on your record of National Insurance contributions and your level of earnings as an employee.

On 6 April 2002, the State Second Pension reformed SERPS to provide a more generous additional State Pension for low and moderate earners, and to extend access to additional State Pension to include certain carers and people with long-term illness or disability. Any SERPS entitlement already built up is protected both for current State Pension recipients and for those who have not yet reached State Pension age.

The State Second Pension gives employees earning up to a certain amount £31,100 (in 2008/09) a better pension than SERPS, whether or not they are contracted out into a private pension, with most help going to those on the lowest earnings (up to around £13,500 in 2008/09).

Any additional State Pension will also be calculated when you claim your State Pension.

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Contracting out

If you are an employed earner with annual earnings above a certain amount (£4,680 in 2008/09) you cannot leave the basic State Pension scheme. However, you can if you wish, choose to leave the additional State Pension scheme and join a private pension scheme instead. This is called 'contracting out'.

If you choose to contract out by joining your employer's contracted-out occupational pension scheme, both you and your employer will pay lower, reduced rate National Insurance contributions. When you retire, your second pension will come from your employer's scheme and not from the additional State Pension. Although, most people will continue to build up a small entitlement to the additional State Pension as well.

You can also contract out by joining stakeholder pension scheme or a personal pension scheme. If you do this, instead of paying lower National Insurance contributions, once a year HM Revenue & Customs will pay directly into your pension a rebate of your National Insurance contributions. The rebate is intended to provide benefits broadly the same as the additional State Pension given up.

You can also join a stakeholder pension scheme or a personal pension scheme without contracting out of the additional State Pension, but if you do this, you won't get the rebate.

You will usually get tax relief on your contributions to a private pension scheme. With a basic rate of income tax of 22 per cent, every £100 that goes into your pension costs you £78 (based on the tax year 2008/09). If you pay income tax at the higher rate of 40 per cent, every £100 that goes into your pension fund costs you £60 (based on the tax year 2008/09).

Some occupational pension schemes and some personal pensions schemes are organised on a 'rebate-only' basis. This means that the only money being paid into the scheme is your National Insurance contributions rebate.

If you have chosen this type of second pension, it will give you roughly the same pension you would get from the additional State Pension. You may still need to think about whether this will be enough to support the lifestyle you want when you retire.

From 6 April 2003 the State Second Pension gives employees earning up to £31,100 (in 2008/09) a better pension than SERPS, whether or not they are contracted out.

Most help goes to those who earn less than £13,500 in 2008/09.

A person contributing to a contracted-out personal pension who is earning less than £13,500 in 2008/09 in a tax year will also get a State Second Pension top-up for that year. The top-up reflects the more generous additional State Pension provided by State Second Pension.

The Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008

The Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008 provide for the abolition of contracting out on a money-purchase (defined-contribution) basis. The aim is to introduce this change in April 2012 or the end of the Parliament at the latest. Once this takes effect, you will no longer be able to contract out of the State Second Pension through:

  • a money-purchase (defined-contribution) occupational pension scheme; or
  • a personal pension or a stakeholder pension.

If you are already contracted out through either type of scheme, you will:

  • be able to continue to make your own contributions to the scheme;
  • be able to continue to benefit from any employer contributions to the scheme; but
  • no longer be able to benefit from any rebate of National Insurance contributions

Contracting out through an occupational salary-related (defined-benefit) scheme will continue to be allowed, but the long-term future of contracting out for these schemes will be reviewed in the future.

Find out more about pensions reform

If you are not sure what is the best choice for you, you may want to get further help. If you want to know more about contracting out , please see Contracted-out pensions - Your guide [PM7]

What else should I know

If you contributed to the additional State Pension before April 2002 through SERPS, there is some important information you need to know about the percentage of SERPS that you may be able to pass on to your husband, wife or civil partner if you die.

More information on inheriting SERPS is available on this website or you can read or print our leaflet 'Important information for married people - Inheritance of SERPS'.

You may pass on only a maximum of 50% of your additional State Pension from State Second Pension.

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More help for carers

If you've been looking after someone throughout any of the last three years, you may be eligible for additional State Pension if you have:

  • not worked
  • earned low wages

If you are entitled to Carer’s Allowance, Income Support as a carer or Child Benefit for a child under six, you don’t need to do anything different and will build up State Second Pension (an additional State Pension).

If not, you may need to start building up your State Second Pension by applying for Home Responsibilities Protection.

If you have been caring for a sick or disabled person full time without receiving Income Support as a carer or Carer’s Allowance, you will need to claim Home Responsibilities Protection to get State Second Pension.

If you looked after someone throughout the 2004/2005 tax year, the latest date you can apply for Home Responsibilities Protection is 5 April 2008.

What do you need to do?

Our leaflet, about State Pensions, will tell you about:

  • State Second Pension
  • the entitlement conditions
  • what you need to do

Read or print a copy of our leaflet about State Pensions

Or you can ring 0845 7 31 32 33 for a copy.

More information

To find out more about additional State Pensions (SERPS and Second State Pension), read and print A guide to State Pensions.

For more information contact The Pension Service.

You can read or print or request copies of our guides and claim forms on this website.

You can apply for a Pension Forecast by reading or printing the Pension Forecast form from our resource centre.

Other Help

State Pension
Pension Credit
Winter Fuel Payments
Direct Payments

Remember that this website is only a general guide to benefits and schemes and is not a full and authoritative statement of the law.

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