BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: Business  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
E-Commerce
Economy
Market Data
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Thursday, 12 December, 2002, 13:08 GMT
Pensions explained: What is Serps?
What is Serps?
As part of its understanding pensions series, BBC News Online provides a guide to Serps.
What is it?

The State Earnings Related Pension (Serps) was the name of the government's additional pension scheme until April 2002.

Anyone who was earning more than 75 a week and had not "contracted out" (see below) would have been building up an additional pension under Serps.

It is now called the State Second Pension.

However, people who made contributions before April 2002 will receive an additional pension based on Serps way into the future.

Why did the government replace Serps?

The government replaced Serps with the State Second Pension, because it wanted to give certain disabled people and those with long-term illnesses the chance to benefit from an additional pension scheme.

The new scheme also fits in with the government's political agenda, as it increases support for low to middle income earners.

While the State Second Pension is still related to earnings, people on modest earnings who qualify under the rules are much better off under this system than Serps.

This is because the system "credits" or "bumps up" earnings for eligible groups to a flat rate of 10,800

In other words, if you earn under this amount (2002/2003) but more than the National Insurance lower earnings limit of 3,900 (2002/03), the State Second Pension rules treat you as if you had earned 10,800.

Am I automatically a member?

If you earned enough and paid employees' National Insurance Contributions, you were automatically a member of Serps.

This is known as "contracting in".

Serps was related to earnings, so the amount people will get at state pension age will vary.

Members of qualifying private pension schemes could "contract out" of Serps.

If employees joined a contracted-out occupational pension scheme, they and their employer would pay lower National Insurance contributions.

If you contracted out of Serps using a personal pension plan or a stakeholder pension plan, the Government paid part of your National Insurance contributions into the plan once a year in the form of a rebate.


Government plans

Help and analysis

Case studies

TALKING POINT
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes