Definition
The State Second Pension (SSP), abbreviated as S2P, was a supplementary UK government pension scheme introduced in 2002 to enhance the basic state pension. It replaced the State Earnings Related Pension (SERPS) and was designed to provide higher retirement benefits to lower and moderate earners. Contributions to the SSP were made through National Insurance payments. As of April 2016, the SSP was succeeded by the New State Pension, which offers a flat-rate pension based on years of contributions.
Examples
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John’s Contribution to SSP: John worked from 2003 to 2015 and made National Insurance contributions throughout these years. These contributions qualified him for additional benefits under the SSP scheme, enhancing his basic state pension.
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Mary’s Transition to New State Pension: Mary reached state retirement age in May 2016. Under the New State Pension system, her pension benefits were calculated based on her total years of National Insurance contributions, which now included the contributions she had made under the SSP scheme.
Frequently Asked Questions
What was the purpose of the State Second Pension?
The SSP aimed to provide a higher level of retirement income to lower and middle-income earners compared to its predecessor, SERPS.
How were contributions to the SSP made?
Contributions were made through National Insurance payments, with the level of pension benefits determined by the amount and duration of contributions.
How did the New State Pension affect those who were part of the SSP scheme?
Those reaching state pension age after April 2016 now receive the New State Pension, which combines the SSP and the basic state pension into a single-tier system calculated based on total years of contributions.
Can I still benefit from SSP if I retire after 2016?
No, the SSP was discontinued in April 2016 and replaced by the New State Pension. Benefits are now derived from the new system.
How was the SSP different from SERPS?
While both were supplementary pensions, the SSP generally provided greater benefits for lower and middle-income earners compared to the flat-rate-benefit nature of SERPS.
Related Terms
State Earnings Related Pension (SERPS)
A UK government pension scheme replaced by the SSP in 2002. SERPS provided additional retirement benefits based on an individual’s earnings and National Insurance contributions.
New State Pension
Introduced in April 2016, the New State Pension is a flat-rate pension system that replaces the basic state pension and the SSP. It’s based on the total number of years of National Insurance contributions.
National Insurance Contributions
Mandatory payments made by employees and employers in the UK, which fund various welfare benefits, including state pensions.
Online References
- UK Government - State Pensions
- National Insurance Contributions Explained
- The Pension Advisory Service - State Second Pension
Suggested Books for Further Studies
- “The UK State Pension: A Guide” by Sarah Willis
- “Pension Schemes and Retirement Benefits” by Mark Everett
- “Understanding Pension Schemes” by Paul Lewis
Accounting Basics: “State Second Pension (SSP)” Fundamentals Quiz
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