A detailed guide to State Pensions for advisers and others

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Additional State Pension
Additional State Pension was introduced in 1978 and is the part of the State
Pension that is related to the person’s annual earnings. It was originally referred to
as State Earnings Related Pension Scheme (SERPS) and became known as the
State Second Pension scheme following changes introduced in April 2002.
Payments are based on the amount of Class 1 annual National Insurance
contributions paid, or treated as having been paid, on earnings between the
National Insurance Lower and Upper Earnings Limits in each tax year.
The rules also allow people to build up extra payments of additional State Pension
(this used to be known as an increment) by delaying the date from which they
claim their additional State Pension.
[SSCBA 1992 sections 44-46 and Sch 4A]
From April 2009, it is planned that the upper earnings limit will be replaced by the
Upper Accrual Point (UAP) for the purpose of capping entitlement to the State
Second Pension. The UAP will be frozen in cash terms, leading to a gradual erosion of
earnings-related accruals.
Self-employed
If someone has been self-employed, the National Insurance contributions they paid
as a self-employed person will not count towards any additional State Pension.
Widowed or divorced
There are special rules on additional State Pension for people who are widowed or
divorced or whose civil partnership has ended due to the death of their civil
partner or the civil partnership has been dissolved. Please see the section
Inherited SERPS on page 38.
How to claim additional State Pension?
There is no need to apply separately for it. We will automatically work it out when
a person claims their State Pension.
How to qualify?
The amount paid is based on the level of a person’s earnings in each tax year from
April 1978 (or the tax year in which their 16th birthday takes place, if this is later)
to the tax year before the year in which they reach State Pension age.
SERPS 1978 to 1997 – A person must have paid Class 1 National Insurance
contributions on earnings that were higher than the annual Lower Earnings Limit
for National Insurance contributions set for a tax year. This limit is set each year
by Parliament.
Additional State Pension is worked out using the amount a person has earned
above this level each year. A reduction is made in the calculation of the additional
State Pension if they were contracted out of the scheme during this period.
(See page 38 for more information on contracted-out arrangements.)
SERPS 1997 to 2002 – A person qualifies if they paid standard rate Class1 National
Insurance contributions and they were contracted into the State scheme.
(See page 38 for information if they were contracted out of the State scheme.)