Welcome to the website of
GRAY & ASSOCIATES
Gray & Associates is a trading name of Investments Ltd. We are a firm of Independent Financial Advisors (IFAs). We hope you will find this site to be informative, and both clear and easy to use.
We specialise in pensions advice, using our Active Switching Facility together with Technical Analysis, to pursue significantly better performance for our clients' funds than is seen usually.
The State Earnings Related Pension Scheme (SERPS)
The State Earnings Related Pension Scheme (SERPS) was the second State pension scheme to provide an earnings related pension in addition to the basic State pension.
It was introduced as a replacement for the State graduated pension scheme in the Social Security Act 1975 and began in 1978.
SERPS was only available to the employed and was dependent on earnings upon which Class 1 National Insurance Contributions (NICs) had been paid.
An individual's entitlement to SERPS was based upon upper band earnings. Upper band earnings are between the lower earnings limit (£97 per week for the current tax year (2010/11)) and the upper earnings limit (£844 per week for the current tax year (2010/11)).
When SERPS was introduced, the government promised to provide a pension of up to 25% of upper band earnings. This was equal to 1% of upper band earnings for each year of membership, up to a maximum of 20 years. Once more than 20 years had been completed, only the top 20 years earnings were selected.
When the pension was calculated, the earnings from earlier years were re-valued each year up to State pension age in line with increases in National Average Earnings.
The Government discovered that SERPS provision at this level was quite generous, to the point of being too expensive. Thus changes were made to the way in which SERPS was calculated under the Social Security Act 1986.
These changes were as follows:
- The maximum SERPS pension available was reduced from 25% to 20% of upper band earnings.
- This reduction was phased in from 6 April 2000 to 5 April 2010. Each tax year the maximum SERPS pension available was reduced by Â½%. It applied to SERPS accrual in tax years from 6 April 1988 onwards and only for individuals who would reach State pension age on or after 6 April 2000.
- For example, if an individual retired on 1 September 2006, the maximum SERPS pension would be 25% (as a proportion of lifetime average earnings) accrual to 5 April 1988, plus 21.5% (as a proportion of lifetime average earnings) accrual from 6 April 1988 to 1 September 2006.
- The calculation of upper band earnings was changed for SERPS purposes from the top 20 years' earnings to re-valued lifetime earnings.
These changes significantly reduced the value of SERPS pensions to individuals reaching State pension age on or after 6 April 2000.
Widow(er)'s Benefits under SERPS
A widow(er) may be entitled to receive an additional SERPS pension. The amount payable to the widow(er) depends on the date the late spouse reached, or would have reached, State pension age.
The maximum widow(er)'s SERPS pension was 100% of the spouse's entitlement. However, with effect from 5 October 2002 this is being reduced to 50% in increments of 10% every 2 years until 6 October 2010.
The Child Support, Pensions and Social Security Act 2000 introduced the State Second Pension (S2P) which replaced SERPS with effect from 6 April 2002.
Individuals who paid into SERPS between 1978 and 2002 are still entitled to take these benefits when they reach State pension age. No-one will be worse off under S2P than they would have been under SERPS.
For more information, please contact us.
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Address: 34 Kington St. Michael, Chippenham, SN14 6JJ
Telephone: 01249 750204, 01249 750775, 01249 750573
Fax: 01249 758882
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