| |
|
|
Additional State Pension
Depending on your circumstances, you may be entitled to an Additional State Pension when you come to retire. As the name suggests, the Additional State Pension is paid in addition to the Basic State Pension.
Up to April 2002, the Additional State Pension was more commonly called the State Earnings-Related Pension Scheme, or SERPS for short. SERPS was a top-up to your Basic State Pension, and was based on your level of earnings and National Insurance record.
|
|
|
From April 2002, the State Second Pension (S2P) was introduced to replace SERPS and promised to provide a simplified and more generous Additional State Pension for low and moderate earners, carers and people with a long-term illness or disability.
The State Second Pension is particularly advantageous for those people who earn less than £11,600 (in 2004/2005), as under these new rules, these people will be treated as if the were earning £11,600.
Do I qualify?
You will qualify for the Additional State Pension provided that, at some point in your working life, you have been the employee of a company. Only those people who have always been self-employed will not qualify.
How much will I receive?
The amount of Additional State Pension that you could expect to receive will depend on your individual circumstances. The calculations for State Scheme Benefits are extremely complex, so take advice.
You can write to the Department for Work and Pensions (DWP) and request a pension forecast (an estimate of state pension entitlement). This will include your entitlement to the Basic State Pension, Graduated Pension, SERPS and State Second Pension benefits, and should give you an idea of how much you could expect to receive in retirement.
How do I claim
When you make a claim for the Basic State Pension, and Additional State Pension due to you will also be calculated.
Is there anything else I should know?
If you want to, you can choose to ‘contract out’ of the Additional State Pension, either by membership of a company pension scheme, or an ‘appropriate personal pension’, such as a Stakeholder Pension.
By contracting out of the Additional State Pension, you are effectively re-directing some of your National Insurance Contributions into your own pension scheme (and therefore into the Stock Market), with the aim that these contributions will grow enough to provide a higher pension income that you would have got from the Additional State Pension offered by the government.
Contracting out is not a once-and-for-all decision – you can contract back in at a later date if you want to.
By contracting out, you are taking the risk that the stock market performance will give you a better return for your money that the amount you could receive had you not contracted out.
If you are unsure what to do, seek advice – contact your pension provider or an IFA (Independent Financial Adviser) for more details.
|
|
