State Earning Related Pension Scheme (SERPS)

In addition to the basic state pension , in the past the government allowed employees to boost their income in retirement by joining SERPS.

In April 2002, SERPS was replaced by the State Second Pension ( SP2 ). To boost the basic state pension, SERPS provided for an additional pension to be paid related to earnings from employment. Earnings falling within certain bands (known as the upper and lower limits) qualified towards your SERPS entitlement. The calculation on how much you may be entitled to from SERPS can be complex.

If you'd like to receive an estimate of what your entitlement will be, you may request a calculation via The Pension Service website, part of the Department for Work & Pensions.

Since the late 1980s it has been possible for employees to 'opt out' of SERPS and have the payments made towards a private pension plan. The benefits of doing so are not clear-cut, and the decision over whether you should do so can be finely balanced.

It is worth remembering that although self employed people are required to pay an additional 'earnings-related' national insurance contribution (known as Class 4), this would not have entitled them to benefits from SERPS.

Last Updated: April 2008 © Moneyextra.com

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