What is a SERPS pension?

The state earnings-related pension scheme (SERPS) operated from the 1970s to the early 2000s. It acted as a top-up to the basic state pension and was later replaced by the second state pension, which ran until 2016.

You'll only be eligible for SERPS if you're an employee paying class 1 national insurance contributions (not available to the self-employed). 

The amount you get from SERPS depends on your salary. Many people were advised to opt out of SERPS. Instead, their national insurance rebates were paid into personal pension plans. 

Many people did not realise what this did, and as a result, lost track of where their contributions went. 

How much SERPS pension can I get?

In the 2019/20 tax year, the maximum additional state pension was £176.41 per week.

However, the actual amount individuals received varied based on factors such as earnings and the duration of being contracted into the SERPS.

Can I pay into SERPS today?

A single-tier new state pension replaced the State Second Pension. Therefore, you can no longer contribute to SERPS.

Can I inherit a SERPS pension?

If your spouse or civil partner has passed away under SERPS pensions relations, you may be eligible to receive a portion of your SERPS pension. 

The amount you can receive ranges between 50% and 100% of your late spouse's SERPS pension. These rules aim to provide financial support to surviving spouses or civil partners.

Man's date of birth	Amount that can be inherited
5/10/1937 or earlier	100%
6/10/1937 to 5/10/1939	90%
6/10/1939 to 5/10/1941	80%
6/10/1941 to 5/10/1943	70%
6/10/1943 to 5/10/1945	60%
6/10/1945 or later	50%

 

Woman's date of birth	Amount that can be inherited
5/10/1942 or earlier	100%
6/10/1942 to 5/10/1944	90%
6/10/1944 to 5/10/1946	80%
6/10/1946 to 5/10/1948	70%
6/10/1948 to 5/10/1950	60%
6/10/1950 or later	50%

 

Can I cash in my SERPS?

The additional state pension from SERPS is not something that can be "cashed in" like some private pensions. 

Instead, it is paid directly into your bank account along with your basic state pension. The income from SERPS is guaranteed for life, providing a stable source of financial support.

How does SERPS affect the state pension I receive?

This depends on when you reach state pension age. If you reached the state pension age before 6 April 2016, you'll receive the old 'basic state pension'.

You may also be entitled to receive some 'additional state pension', and this amount may be reduced if you are ever contracted out of it.

If you reach state pension age after 6 April 2016, you'll receive the 'new state pension'.

What does contracted out mean?

In the UK, until 2016, individuals had the option to "contract out" of SERPS, the state's second pension, and redirect their National Insurance contributions to a private pension plan.

The portion of a pension fund that originated from these contracted-out contributions was referred to as "protected rights" because it was subject to specific rules and regulations governing its use. 

Individuals who worked in the public sector were automatically contracted out of SERPS into a Guaranteed Minimum Pension (GMP). 

Can you transfer out a protected rights pension?

Yes, you can transfer your protected rights pension, as they have become part of your normal defined contribution (DC) benefits, as long as your chosen scheme is another registered UK pension plan or a qualified recognised overseas pension scheme (QROPS).

Before 6 April 2012, there were distinctions between how protected rights and non-protected rights benefits could be taken. However, since that date, when contracting out was completed, both types of benefits have been treated equally.

With the introduction of pension freedoms in April 2015, individuals gained more flexibility in accessing their pension benefits, including protected rights pensions.

• You can generally access your protected rights pension at the age of 55.
• If you choose to take your protected rights pension as a lump sum, only the first 25% is tax-free, and the remaining 75% is subject to taxation at your marginal rate of income tax.

 

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