State pensioners who retired before 2016 could be handed a massive £923 on top of their regular Department for Work and Pensions (DWP) payments in May. The state earnings related pension scheme (SERPS), also known as the ‘additional state pension,’ operated between 1978 and 2002.
It was replaced by the state second pension, which ran until 2016. If you retired before April 2016, paying into SERPS could result in a higher state pension. But it was possible to opt out, known as “contracting out,” and pay contributions into a private workplace pension instead.
The maximum additional state pension you can get in 2026/27 is £230.54 a week. Over a month, that works out at £923, and it could be added to your regular £801 basic state pension rate.
Who is eligible for SERPS?
The basic state pension is for those over age 73, because being born in 1953 qualifies you for the new rate. Unbiased explains: “To be eligible for SERPS, you had to be employed and paying Class 1 National Insurance contributions (it wasn’t available to the self-employed).
“If you were part of a personal or company pension scheme, it's likely you were ‘contracted out’ of SERPS.
What does contracting out mean?
Contracting out meant you paid lower NI contributions, with your employer or pension scheme investing the savings into an alternative pension plan, known as a ‘protected rights pension’.
The idea was that this alternative pension would hopefully provide you with a pension pot that was larger than the one you would have received from SERPS.
Some workplace pension schemes would offer you the option of contracting out of SERPS. Others would contract you out automatically, often without you having to make a decision.
As contracting out of SERPS did not involve making any additional payments, you may not know if you have a protected rights pension or not.
Note that as of 2012, protected rights pensions were merged into the general pension pot and no longer have a separate status.
