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State Earnings-Related Pension Scheme (S.E.R.P.S) – UK

This definition must be read in a historical context.

Introduced by the Social Security Pension Act 1975 this scheme which came into force in 1978 aims to provide earnings-related pensions in place of the exisiting flat-rate pension payable on retirement, widowhood or invalidity. The new retirement pension in the UK will comprise a basic minimum plus an addidtional earnings-related premium. Eventuelly, retirement pensions will be based on the contributor’s twenty best years’ earnings during his normal working life. This full entitlement will not materialize until the contributor has been paying the new income-related national insurance contributions, which were introduced as part of the scheme, for more than twenty years. Until then, entitlement to the earnings-related part of the ultimate pension will be restricted to 1 1/4 per cent of avarage annual earnings for each year the new contributions have been paid, building up to 25 per cent after twenty years.

Reference: The Penguin Business Dictionary, 3rd edt.