British State Pension Reform

British State Pension Reform..

The British State Pension began in 1968 when Barbara Castle launched the “State Earnings Related Pension Scheme” (SERPS).

This pension scheme gave workers a pension of 25% of their pay on retirement, subject to full payment of National Insurance contributions. It was a user pays pension system.

The scheme changed in 1988 when Margaret Thatcher allowed workers to contract out, if they wished and be able to divert some of their NI contributions into a personal pension scheme. This obviously meant a lower SERPS payout on retirement, but an additional one from their private pension.

In April 2002, under Tony Blair, SERPS was changed to the State Second Pension.


Until April 2002, the additional State Pension for employees was called the State Earnings-Related Pension Scheme (SERPS).

The amount of SERPS pension you received was based on:

your National Insurance contributions
how much you earned

The State Second Pension is more generous for low and moderate earners, certain carers and people with a long-term illness or disability.

You may not become entitled to the additional State Pension based on contributions or credits during periods where one of the following applies to you:

you’re self-employed (because you pay lower National Insurance contributions)
you’re unemployed
you’re in full-time training

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