Disclaimer: Our website and publications aim to give you general information to help you make financial decisions. It is not advice, nor can it take account of your own particular circumstances. For advice with a view to making decisions about your own circumstances you should consult a financial or other professional adviser.

© The Financial Services Authority.

What the State provides

Basic State Pension

If you're working, you are usually paying National Insurance contributions (NICs). This means you are building up a right to get a basic State Pension when you reach State Pension age. This is 65 for men and between 60 and 65 for women, depending on when you were born. Not everyone gets the full State Pension and the government can change the rules for State Pensions at any time.

State Second Pension

If you're employed (not self-employed) you may also be building up an additional State Pension, known as the State Second Pension (S2P) but formerly known as SERPS. The amount of S2P or SERPS you get depends on your earnings and your NIC records throughout your working life.

Self-employed people cannot build up a pension through S2P or SERPS. People who cannot work because of long-term illness or disability, and carers may get some State Second Pension.

For more information on State Pensions or to get a forecast of how much your State Pension will be, see The Pension Service website at Related links.

Contracting out of the State Second Pension

If you are an employee, and earning above a certain level on which you've paid National Insurance contributions, you are automatically included in the State Second Pension unless you decide to leave it (called contracting out). If you are contributing to your employer's occupational pension scheme, it may be a contracted-out scheme - check your scheme to find out.

If you decide to contract out:

  • You give up your State Second Pension entitlement and build up a replacement in your own pension fund instead – for example, a stakeholder or personal pension.
  • HM Revenue and Customs will pay a rebate of part of your National Insurance contributions into your stakeholder or personal pension.
  • You will continue to be contracted out of the State Second Pension unless you decide to contract back in. You can review your decision whenever you want to.

For more information, see The Pension Service booklet Contracted-out pensions – Your guide (PM-7) – see related links.

Were you wrongly advised?

We have identified a small group of people who may have been wrongly advised to contract out of SERPS between 1 July 1988 and 5 April 1997. If you were advised to contract out during this time and were above a certain age (known as pivotal age) please see our factsheet The State Second Pension – were you wrongly advised to contract out?. You can download this, or order a copy at Publications

How do I decide?

Your decision about whether to contract out depends on, among other things, your own personal attitude to investment risk. Your decision is about now and the future but you should review it every year because things change. It does not affect past years in which you were contracted out.

For more information download our factsheet The State Second Pension - should you be contracted out? from Publications, where you can also order it online.

Pension Credit

Pension Credit has been introduced by government. It is designed to make sure that people aged 60 and over have a minimum income and that those aged 65 and over with modest savings get some credit for having saved.

For more information on Pension Credit see The Pensions Service website at Related links.