State Earnings Related Pension Scheme meaning

Brexit impact The UK ceased to be an EU Member State on exit day, 31 January 2020. Under the Withdrawal Agreement, the state pension and benefit rights of UK nationals residing in the EU, European Economic Area (EEA) or Switzerland are protected. See: Benefits and pensions for UK nationals in the EU, EEA or Switzerland. Likewise, information on the entitlements of EEA and Swiss citizens to UK benefits and state pensions is set out at: Benefits and pensions for EEA and Swiss citizens in the UK. State pensions A state retirement pension depends on an individual’s National Insurance (NI) contribution record and may consist of up to three elements: the basic old age pension the State Second Pension (S2P—formerly the State Earnings Related Pension Scheme, SERPS) the graduated pension Payments are generally made gross, with tax collected through Pay As You Earn (PAYE) against a person’s other income, such as an occupational or private pension. Income tax can also...

FORTHCOMING CHANGE : Following the Budget 2025 announcement on 26 November 2025, the government is progressing legislation through the National Insurance Contributions (Employer Pensions Contributions) Bill to restrict the level of salary sacrifice pension contributions that qualify for National Insurance Contribution (NIC) relief to £2,000 per year. Any pension contributions above £2,000 made via salary sacrifice will, for NIC purposes, be treated in the same manner as other employee workplace pension payments; that is, primary and secondary Class 1 NIC charges will apply to those contributions. This reform is scheduled to take effect from 6 April 2029. The Bill leaves the detailed rules to be set out in regulations. For additional detail, see News Analysis: Bill to limit NIC relief passes Second Reading in Commons despite opposition and Practice Note: Salary sacrifice NIC relief to be capped at £2,000 from 6 April 2029, below. What is salary sacrifice? Salary sacrifice is an arrangement in which an employee gives up entitlement to a portion of their taxable pay...

A-day 'A-day' is the widely used term for the broad pension tax 'simplification' reforms that began on 6 April 2006. The changes covered: how much pension contribution was allowed, the kinds of schemes an individual could invest in, the sums that could be taken (and when), and the choices available for any remaining fund. A-day also introduced the annual allowance and the (now abolished) lifetime allowance. See: Annual allowance and Lifetime allowance. AFPS AFPS: Armed forces pension scheme; see Practice Note: Public sector pensions and family proceedings. Accrual rate The speed at which pension benefits build as pensionable service is completed in a final salary scheme, eg 1/60 for each year of pensionable service. Accrued benefits The benefits earned in respect of service up to a specified date. Added years Extra pension provided by adding further years of pensionable service in a salary-related scheme. Such additional years are secured via transfer payments or through additional voluntary contributions/augmentation...