Contracting out of the State Second Pension

updated: January 21, 2010

The State Second Pension (S2P) and its predecessor SERPS (State Earnings Related Pension Scheme) that it replaced in 2002, is an integral part of any eligible person’s retirement planning, ie where money will come from in old age to pay for things.

It works as a top up to the Basic State Pension. For further details, please refer to State Pensions.

S2P is available for anyone who is employed (so the self employed do not qualify) and pays National Insurance (NI) contributions.   Thus it is available for anyone who earns more than £105 per week (2008/2009 figures).  This figure is known as the Lower Earnings Limit or LEL: there is also an Upper Earnings level (UEL), currently £770 per week.

Although NI is levied and paid on earnings above this figure, no S2P benefits apply.

The actual provision for S2P comes from the NI that you and your employer pay.

How much you actually get in retirement is complex and can only be accurately known by getting a forecast of anticipated payments in retirement from the Department for Work and Pensions (or DWP) by filling in a form BR19.

To obtain further information please click here for our pdf Guide to Contracting Out of S2P.