The State Earnings Related Pension Scheme (SERPS) allowed people to increase their state pension income.
They could achieve this by building up ‘additional state pension’, based on their level of earnings over their working life.
However, it was possible to opt out of SERPS or the Second State Pension (known as ‘contracting out’) in order to enhance your workplace pension or private pension instead.
This means that if you were working between 1978 and 2016, you may have been contracted out for some of this time, if any of your workplace pensions offered this option.
To be eligible for SERPS, you had to be employed and paying Class 1 national insurance (NI) contributions (it wasn’t available to the self-employed).
If you were part of a personal or company pension scheme, it's likely you were ‘contracted out’ of SERPS.
Contracting out meant you paid lower NI contributions, with your employer or pension scheme investing the savings into an alternative pension plan, known as a ‘protected rights pension’.
The idea was that this alternative pension would hopefully provide you with a pension pot that was larger than the one you would have received from SERPS.
Some workplace pension schemes would offer you the option of contracting out of SERPS. Others would contract you out automatically, often without you having to make a decision.
As contracting out of SERPS did not involve making any additional payments, you may not know if you have a protected rights pension or not. Note that as of 2012, protected rights pensions were merged into the general pension pot and no longer have a separate status.
You may not know whether your company pension membership meant you were automatically contracted out. It may even be that you chose to contract out while you were a member of a workplace or personal pension and have forgotten about making this decision.
Your first task is to find this out, which a financial adviser should be able to help with.
Alternatively, you can check your NI record or contact the Pension Service to determine whether you were contracted out.
The maximum additional state pension you can get in 2024 is £218.39 per week, but not everyone will get this amount, as it depends on factors such as how much you earned and for how long you were contracted into SERPS.
SERPS ended in 2002 and was replaced by the state second pension, which operated in a similar way.
This ended in 2016 and was replaced by the ‘new state pension,’ so you can no longer contribute to SERPS.