State Second Pension Entitlement

The State Second Pension, previously known as SERPS (until April 2002) and currently referred to as S2P, but also known as the State Additional Pension, is a pension paid by the government in addition to the basic State Pension. State Second Pension is a scheme which tops up your basic State Pension. SERPS calculated your additional bonus according to how much you earned and for how many years you had made National Insurance contributions. S2P also considers your earnings, but importantly it also takes into account time spent out of work for legitimate reasons such as illness. S2P helps both those in employment and those unable to work either because they are currently incapable or because they are currently caring for others. Those who fall into these categories are given the chance to earn an extra benefit on top of their basic State Pension without being required to contribute anything.

The scheme has undergone a myriad changes, and it is very difficult to know which varieties of State Second Pension you are entitled to, and how much you will gain from each. Currently you can build up State Second Pension (S2P) if:

• You earn at least £4,524 (in 2007/2008) throughout the tax year
• You care for one or more children younger than six years of age, and claim child benefit throughout the tax year
• You are a carer throughout the tax year for someone who is ill or disabled
• You are unable to work due to long-term illness or disability, are entitled to benefits as a result, throughout the tax year, and have been earning for at least one tenth of your working life

Until 2010, you cannot build up entitlement to S2P using a combination of the above during one tax year, that is, you cannot combine time spent earning, ill and acting as a carer during one tax year to build up S2P. You are not entitled to S2P if you have ‘contracted out’ of the State Second Pension. For more information on this topic see Contracting Out. You are also not entitled to S2P if you earn less than £4,524 a year (in 2007/2008), if you are self-employed, or if you pay reduced National Insurance contributions because you are a married woman (see National Insurance Contribution Classes).