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.direct.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.

State Pension Age

The Government has announced new proposals for increasing the State Pension Age from 65 to 66. These will speed up the rate at which rises in State Pension Age will occur. Your State Pension Age will be affected if you are a woman born between 6 April 1953 and 5 April 1960, or a man born between 6 December 1953 and 5 April 1960. These changes require the approval of Parliament. The Government is also considering the timetable for future increases in the State Pension Age from 66 to 68. For further information go to www.direct.gov.uk.