What are State Second Pensions?
State Second Pensions go by a number of alternative names, and it is therefore important to clarify what they are.
The State Second Pension is also known as S2P, or the Additional State Pension. In the past, State Second Pensions have also been known as the State Earnings-Related Pension Scheme (SERPS).
State Second Pensions provide an additional income in retirement on top of the Basic State Pension. The Basic State Pension currently (2010/11) provides £97.65 per week for a single person and £156.15 for a couple.
Is this enough for you to have a comfortable retirement? If not you should discuss your options with one of our experienced pension advisers who can help work out the most cost effective way for you to save for your retirement.
You can call 0800 678 5929 or make a pension enquiry
How do I get the State Second Pension?
Entitlements to the State Second Pension can be built up by those who earn over £4,940 from one job, by those looking after children under 12 years old and claiming child benefit, by anyone caring for a sick or disabled person for over 20 hours per week, by registered foster carers, and by those receiving other benefits due to disability.
Workers in other second pension schemes (i.e. running parallel to the Basic State Pension), such as company pension schemes, stakeholder pensions, or personal pension schemes, do not usually build up entitlements to State Second Pensions. This arrangement is called ‘contracting out’ of the State Second Pension. However, they pay lower National Insurance contributions to reflect the fact that they are not paying the entitlements for State Second Pensions. The government also pays part of their National Insurance contributions into their pension as well.
From 6th April 2012, the arrangements for contracting out of State Second Pensions will be discontinued for certain types of pension schemes. These include personal or stakeholder pensions, and defined contribution workplace or occupational pension schemes.
Defined contribution pension schemes are those where the employee decides the level of his contributions into the pension. Defined contribution pension schemes are also known as money purchase pensions.
Members of these pension schemes will be automatically brought back into State Second Pensions from April 2012, and will begin to make contributions and build up entitlements to State Second Pensions from that date onward.
It is also important to note that the self-employed do not contribute to State Second Pensions, due to the lower level of National Insurance contributions they pay. There are also no contributions to State Second Pensions on behalf of those who are unemployed or in full-time training, although they may still qualify for credits towards the Basic State Pension.
Predicting income from State Second Pensions
A State Pension Forecast is available from The Pension Service which can estimate how much you stand to gain from both your Basic State Pension and State Second Pension.
This can tell workers how many years of contributions to State Second Pensions they have already built up, and an estimate of the current value of their State Second Pension based on the National Insurance contributions they have made.
The forecast can also indicate how much eventual payouts from Basic State Pensions and State Second Pensions would be, for those who decide to put off claiming them.
The forecast can also show if it is possible to increase income from Basic State Pensions or State Second Pensions for those who can use the NI contributions of a late or former spouse or civil partner.
In most cases this is significantly lower than what you would expect to live off in retirement.
Try our pension planner to work out what you need for the income you want in retirement
