State Pension Schemes - Structure, Relevance, And Application

Question 1

What was the original objective of SERPs?

Answer 1

*State earnings related pension benefit

*To boost the basic state pension by 25 per cent of an individual’s upper band earnings over a period of their best 20 years.

Question 2

Over what time period were an individual’s earnings considered to calculate the original 25 percent boost to the basic state pension under SERPS?

Answer 2

*20 years

Question 3

‘Additional State Pension’ refers to which to government benefits?

Answer 3

• State Earnings-Related Pension Scheme (SERPS): Introduced in 1978, this scheme allowed employees to build up an additional pension based on their earnings during their working life.
• State Second Pension (S2P): Introduced in 2002, S2P replaced SERPS and was designed to be more generous, particularly for low and middle-income earners.

Question 4

How do basic and new state pensions increase each year? How do Additional state pension benefits increase?

Answer 4

Basic and New state pensions increase by the ‘triple lock’ each year. This is which ever is the highest out of:
* 2.5%
* Rate of earning growth
* CPI

Additional state pension benefits increase by:
* CPI only
* Only payable to those who have reached state pension age by 6th April 2016.

Question 5

Are new and basic state pension means tested? Are they taxable?

Answer 5

• Not means tested; paid regardless of retirement income or assets.
• Paid without tax deducted but are taxable.

Question 6

Deferal of the Basic state pension. How much? What happens if deferred for over a year?

Answer 6

More favorable than the new state pension.
* 1% increase for every 5 weeks
* 10.4% per annum

If deferred for over a year, the pension deffered could be commuted into a taxable lump sum.
* Calculated as the toal of the deferred pension plus interest
* This is not available for the new state pension.

Question 7

NIC credits

Answer 7

• Part of the basic state pension
• They reduced the number of years needed to gain a full state pension (which was 30)
• Available to those who could not contribute due to being unable to work
• Awarded for illness, unemployment, bringing up children, caring for others

Question 8

What is the new state pension also referred to as?

Answer 8

Single-tier state penson

Question 9

Those retiring by April 6th 2016 receive….

Answer 9

Basic state pension plus any additional state pensions they have accrued.
* Those over 80 receive an additional 25p a week.