State Second Pension

The Category A State Pension is made up to two elements, the basic State Pension (£107.45 a week in 2012/13) and a second-tier, earnings-related, additional State Pension. There have been three different earnings-related state schemes since 1961: Graduated Retirement Benefit (GRB) which operated between 1961 and 1975; the State Earnings Related Pension Scheme (SERPS) which operated between 1978 and 2002; and the State Second Pension (S2P) which replaced SERPS in 2002. Unlike SERPS, S2P provides a second pension for some carers and disabled people. Its structure is more generous to low earners.

It was always the intention that S2P should become flat-rate at some point. The Pensions Act 2007 introduced measures to accelerate this process, so that S2P would become flat-rate by around 2030. The rationale was that, in the face of an ageing population, “the State should move away from the direct provision of pensions related to individuals’ earnings and concentrate on flat-rate provision in the future.”

The current Government has announced its intention to introduce a single tier State Pension, combining the basic State Pension and State Second Pension, early in the next Parliament. It intends to publish a White Paper setting out its proposals in more detail.

This note provides an overview of how the State Second Pension works and how it is changing. Proposals for a single-tier State Pension are covered in more detail in Library Standard Note SN 5787 State Pension reform. Library Research Paper 99/109 provides a more detailed account of the background to the introduction of S2P.