The state additional pension is paid on top of any state basic pension you receive. Even if you do not qualify for any basic pension, you might still get some additional pension. However, many employees do not build up additional pension (or build up only a reduced amount) because they are ‘contracted out’. State additional pension are very complicated and only a brief outline is given here. You do not have to work out your own entitlement. You can get a forecast or statement of your additional pension.

State earnings related pension scheme

If you were an employee, you must have built up a State Earnings Related Pension Scheme (SERPS) pension during the period 6 April 1978 to 5 April 2002. Only employees could belong to SERPS. The scheme was not open to the self-employed or people who could not work. As the name suggests, the amount of SERPS pension is linked to your earnings. This means that higher paid employees build up a larger SERPS pension than lower paid employees. The pension is a percentage of the average of your earnings over your whole working life if this started on or after 6 April 1978. If your working life started before then, the pension is a percentage your average earnings over the rest of your working life from that date onwards. The percentage has changed over the years and there are transitional rules, but broadly the SERPS pension will be at least one-fifth of your average earnings over the relevant years. Only earnings above a certain amount-called the lower earnings limit (LEL)-count towards SERPS. This means employees earning less than the LEL have not built up any SERPS pension. Earnings above an upper earnings limit (UEL) are also ignored. These limits are changed every year, but the LEL for 2003-4 is £77 a week and the UEL is £595 a week. For the purpose of the calculation, the earnings for years when you were not building up SERPS are set to zero. For example, these include any years you were contracted out and all the years from 6 April 2002 onwards, because from then on SERPS has been replaced by the State Second Pension.  The earnings used in the calculation are revalued in line with earnings inflation between the time you earned them and the time you reach state pension age to ensure that the pension maintains its value over the pasts. Like all state pensions, once a SERPS pension starts to be paid it is increased each year by at least enough to keep pace with price inflation.