State Second Pension and SERPS explained

If we now take the same example (Emma, who has worked throughout her life, earning average earnings and reaching State Pension age in April 2016), but assume she was contracted out for ten years between 1978 and 1987, she’d receive a  different amount.

Bear in mind that as she’s contracted out for 10 years, her National Insurance contributions during this period may have been paid into a personal or workplace defined contribution pension, which she can use to supplement her State Pension entitlement.

For example, if she receives:

£21.95 in SERPS between 1988 and 1997

£12.75 in SERPS between 1997 and 2002 and

£37.57 a week in S2P between 2003 and 2016.

This works out at £72.27 a week in additional pension, on top of her basic state pension of £137.60 a week.

So, under the old system, she would get £137.60 a week plus £72.27, which is £209.87 a week. The difference between this State Pension amount and the amount in the previous example, where the woman hadn’t contracted out, is £33.28 a week.

Under the new rules, she would get £179.60 a week, minus £33.28 a week, which would give £146.32 a week.

So, as the rules say you have to receive the higher of the two amounts (either the state pension you’d get under the old system or the state pension you’d get under the new system), she would get £209.87 a week.

Author: wpadmin

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