State Benefits
As well as the pension you will build up in SIPS, you may also be entitled to pension benefits from the Government. This section of the website describes those benefits in more detail.
The State Pension is in two parts — the Basic State Pension (often known as the “old age pension”) and the State Second Pension, or S2P, which replaced the State Earnings-Related Pension Scheme.
The Basic State Pension
The Basic State Pension will be paid to you at State Pension Age, provided you have paid sufficient National Insurance contributions during your working life. If, for example, you are a married woman paying the reduced rate of National Insurance contributions, or if you have spent some years working overseas, then you may not qualify for a full Basic State Pension.
The Basic State Pension is usually increased each April in line with retail prices.
You can check your National Insurance contribution record through your local Department for Work and Pensions (DWP) office, or by contacting the DWP on 0845 3000 168. You can also obtain a State Pension forecast online at www.thepensionservice.gov.uk.
The State Second Pension
S2P replaced the State Earnings-Related Pension Scheme (SERPS) with effect from 6 April 2002. It provides an additional component of pension from State Pension Age. It is based on your earnings, which are taken from your National Insurance records.
Contracting out of S2P
Contracting out involves agreeing not to earn S2P benefits in exchange for reduced National Insurance contributions, with the saving invested in your own pension arrangement.
Final salary sections
If you are a member of a final salary section of SIPS, you will be contracted out of S2P. This means both you and your employer will pay lower National Insurance contributions and you will not build up benefits in S2P while you are a member of SIPS.
Money purchase sections
If you are a member of a money purchase section of SIPS, you may be contracted in to S2P. If you are, you will pay National Insurance contributions at the standard rate and will build up benefits in S2P alongside your pension in SIPS.
Whether you are contracted in or contracted out of S2P will not affect your entitlement to the Basic State Pension.
State Pension Age
State Pension Age is currently 65 for men and 60 for women born before 1950. Between 2010 and 2020, the State Pension Age for women will be gradually raised to 65. For women born after 1955, the State Pension Age is 65. Women born between 6 April 1950 and 5 April 1955 will have a State Pension Age between age 60 and age 65.
