A single-tier pension: what does it really mean? - The Institute For ...

Current state pension system
extensive crediting has been made available for periods of unpaid activity.
However, there are still some individuals who can expect to reach SPA with less
than full entitlement to the BSP, particularly those who have spent long periods
outside the UK. Under the current system, provisions are in place to allow such
individuals to boost their state pension income on the basis of their spouse’s (or
former spouse’s) contributions.
A married (or civilly partnered) individual will receive 60% of their spouse’s
(civil partner’s) BSP entitlement, if this is greater than his or her own BSP
entitlement. This rises to 100% of their spouse’s (partner’s) entitlement after the
partner dies. 21 Individuals can also inherit up to 50% of their spouse’s SERPS and
S2P entitlements when their spouse dies.
Up to 1977, women could elect to pay the ‘married woman’s reduced rate’.
Women who elected to do so paid lower NI contributions and in return built up
no BSP or SERPS/S2P entitlement. After 1977, no one was able to start paying the
reduced rate but, under certain conditions, those who had already opted in could
continue paying it. Only approximately 3,000 women are still paying National
Insurance contributions at the reduced rate, 22 but those who opted to pay it in
the past will potentially have relatively poor NI contribution histories. For this
Box 2.2. Examples of state pension entitlements under current legislation
The following examples describe hypothetical individuals with specific career
histories up to 2016. All the individuals described were born in 1957 and
started their careers at age 21, in 1978. All monetary figures are expressed in
2013–14 earnings terms.
Zainab has been continuously self-employed since the age of 21. Under current
legislation, by 2016 she will have accrued full entitlement to the BSP but will
have no SERPS or S2P entitlement, as she has always been self-employed. She
therefore expects to get £109 a week of state pension income from age 66.
Mohammed has always been employed on moderate earnings. He has never
contracted out. By 2016, Mohammed will have accrued entitlement to a total of
£184 a week of state pension income from age 66. This comprises £109 from
the BSP plus £75 of additional pension.
Ava has the same career history as Mohammed but has always been a member
of her employer’s occupational pension scheme and contracted out of the state
second-tier pension. By 2016, Ava will have accrued entitlement to £121 of
weekly state pension income. This comprises £109 from the BSP plus £12 of S2P
entitlement.
21 Slightly different arrangements exist for divorced people who have not remarried; see, for
example, Bozio, Crawford and Tetlow (2010) for details.
22
See Department for Work and Pensions (2013d) for further details of derived and inherited
rights.
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