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One of the main reasons this company was set up was because of information we found concerning The SERPS Pension Fiasco perpetrated by this and Previous Governments. Anybody who had requested information concerning the Inheritance of SERPS between 1987 and 1999 would more than likely have received incorrect and incomplete, either directly or indirectly, information from the Government. The fact that a Report by the Auditor General in 1999/2000 suggesting that a compensation scheme be made readily available and advertised shows the duplicitous nature of the Department running the scheme. A very few know of the scheme although it could cost in excess of £20 billions and take 50 years to put right.


• The background
• SERPS A Key Objective of the Social Security Act 1986
• What went wrong?
• How did it happen?
• Did the Government attempt to address their failings, a new scheme
• What can you do?

The Background

Everybody should be able to rely on the accuracy and completeness of information provided by Government departments and large so called professional conglomerates. This is particularly true in the case of pensions, where people need to plan ahead, and where, without reliable information, they may make personal decisions that are not in there best interests. Providing misleading information can have very serious financial consequences to many, not just those who received the misleading information directly.

State Earnings Related Pension (SERPS)

The main parts of the state pension were the basic retirement pension and the additional pension. This additional pension was called the State Earnings Related Scheme (SERPS).

In 1986 the law was changed to reduce the amount of SERPS that widows (and some widowers) could inherit from their husband (or wife) from a maximum 100% to a maximum 50%. This was to bring SERPS into line with most company pension schemes. This change was originally planned to start from 6 April 2000.

However, the Department Of Social Security (later Benefits Agency) did not correct the information they gave people straight away. Some people were still getting the wrong information until as late as 1999.

What went wrong?

A key objective of the Social Security Act 1986 was to reduce the future burden of the State Earnings-Related Pension Scheme (SERPS) – the current state second pension – on the National Insurance Fund. This was to be done by providing greater flexibility for people to contract out of the Scheme. The benefits obtained from SERPS were to be gradually reduced to what were considered more affordable proportions through a series of measures taking affect from towards the end of the twentieth century.

As part of the 1986 changes, the government legislated to bring SERPS into line with requirements for contracted-out occupational pension schemes too pay a 50 per cent survivors pension, rather than the more generous state arrangements whereby survivors could inherit 100 per cent of theirs partner’s SERPS pension. This change was deferred for 14 years so that it would not take affect until April 2000. The delay was to give those affected the opportunity to make alternative financial provision to compensate for the effect of the reduction. When implemented, this change would have the effect of reducing by an average of £20 a week the amount of pension a surviving spouse could inherit should their partner die after 5 April 2000, rather than before.

Government departments do not have a duty to provide information on changes in the law, but where they do issue such material, they have a legal responsibility to ensure that it is accurate and complete. However, for nearly 10 years from 1986, the change in the arrangements for the inheritance of SERPS was not publicised adequately and, in particular, information was not included in relevant leaflets until 1996. In addition people were given incorrect information about the provision by the department in letters from, and conversations with, staff between 1986 and 1999.As a result many who have already retired, or are due to, believe that they made decisions about their future pension provision based on incorrect information about the statutory position after 5 April 2000.

How did it happen?

Details of a change in the law were not incorporated into a leaflet in 1987 and the omission was not noticed until 1995.

The problems arose from a series of omissions and misunderstandings about the nature of the change in the arrangements for inherited SERPS. In particular:

• details of the change to arrangements for the inheritance of SERPS after April 2000 were omitted from departmental leaflet when it was published in 1987, even though the absence was noted when a draft was circulated within the Department of Health and Social Security. The only explanations offered for the omission are that the provision was overlooked altogether, or that staff finalising the leaflet considered it more appropriate to place it in publicity material about widows benefits. Ultimately, it appeared in neither at this time;
• pensions leaflets were updated in the late 1980s and 1990s, but the overall accuracy and completeness of the whole documents do not appear to have been considered, or the absence of the provision was not considered significant. As a result, the inherited SERPS provision was not publicised in official leaflets between 1987 and 1996, and the omission gave a misleading impression of the size of the pension that a surviving spouse would inherit, if their partner died after 5 April 2000;
• the Department of Social Security (and later the Benefits Agency) did not appreciate the implications of not informing the public about the change from the time it became law, even though it was not due to come into effect until 2000. For more than a decade, many of the local staff provided incorrect information to the public because they were unaware of the position after April 2000.People obviously believe they would have made different choices about their pension provision had they known about the halving ( later adapted phasing scale) of inherited SERPS;
• the absence of publicity for the inherited SERPS provision was raised in the House of Lords in 1995, during consideration of the Pensions Bill. Although the Benefits Agency updated their pension’s leaflets as a result of this, they did not appear to have appreciated the implications of the change for peoples forward financial planning, and thus the necessity for staff to explain the position after April 2000 and the then current provision. As a result, the Agency did not check that staff were aware of the provision or considered whether the omission in the leaflet might have consequences in the future.

The new scheme

In March 2000, the Secretary of State announced the deferral of the change in the inheritance rules by two years until 6 October 2002. No one was affected by the policy change before that date.

The Secretary of State set out further proposals on the 29 November 2000. These were designed to provide transitional arrangements for those approaching State pension age, and full protection for all existing pensioners.

The Government realised that those people who had already reached State Pension age could not be expected to restore their pension position. As a result, all those who reached state pension age before 5 October 2002 have had there position safeguarded. The Government will calculate their surviving spouse’s entitlement automatically at up to 100 per cent, as per old rules.

For those who were within ten years of State pension age, from date of changes, their will be a phasing in on a sliding scale to allow people to attempt to make alternative arrangements. The phasing in arrangement is set out in the table below.

Maximum % SERPS entitlement for surviving spouse Date when contributor reaches State pension age Date of birth of contributor: Men Date of birth of contributor: Women
Up to 100% 5 Oct 2002 or earlier 5 Oct 1937 or earlier 5 Oct 1942 or earlier
Up to 90% 6 Oct 2002 to
5 Oct 2004
6 Oct 1937 to
5 Oct 1939
6 Oct 1942 to
5 Oct 1944
Up to 80% 6 Oct 2004 to
5 Oct 2006
6 Oct 1939 to
5 Oct 1941
6 Oct 1944 to
5 Oct 1946
Up to 70% 6 Oct 2006 to
5 Oct 2008
6 Oct 1941 to
5 Oct 1943
6 Oct 1946 to
5 Oct 1948
Up to 60% 6 Oct 2008 to
5 Oct 2010
6 Oct 1943 to
5 Oct 1945
6 Oct 1948 to
5 Oct 1950
Up to 50% 6 Oct 2010 or later 6 Oct 1945 or later 6 Oct 1950 or later

The additional pension payable to an individual and any inherited additional pension from the late spouse cannot be more than prescribed maximum payable to a surviving spouse. The two amounts taken together cannot exceed 100%.

What can you do ?

You may have a right to compensation. Click here for further details.

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