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Upper earnings threshold meaning
Published by a LexisNexis Pensions expert
What does Upper earnings threshold mean?
In pensions practice, the upper earnings threshold is the maximum earnings level within the state second pension (S2P) band immediately above the lower earnings threshold (LET). For the relevant tax years, earnings between the LET and this threshold accrued additional State Second Pension at the 10% rate. The threshold, bands and accrual rates were set in social security legislation (with corresponding Northern Ireland provisions) and were amended over time, including changes linked to the introduction of the Upper Accrual Point (UAP) from 2009/10.
New accrual to S2P stopped from 6 April 2016 with the introduction of the new State Pension. The upper earnings threshold remains important for calculating historic additional State Pension (formerly SERPS/S2P) rights for pre‑2016 years and in contracted‑out reconciliation. It is distinct from the National Insurance upper earnings limit and from the upper level of qualifying earnings used for automatic enrolment.
Usage and effect are broadly consistent across England and Wales, Scotland and Northern Ireland under parallel legislation. The term is not used in the Republic of Ireland’s State pension system.
Practically, advisers use the published annual threshold to model past accrual, verify HMRC records and resolve disputes over additional State Pension entitlement.
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