The formulae for calculating the S2P pension built up over a working life is complex and weighted towards low earners. For example, based on 2012/13 figures, the highly theoretical maximum S2P figure based on membership from age 16 to an SPA of 68 is currently:
| Earnings £ per year |
S2P £ per year |
| Less than 5,564 | Nil |
| 5,564 - 14,700 |
4,597 |
| 20,000 |
5,127 |
| 30,000 |
6,127 |
| 40,040 or more | 7,131 |
S2P pensions in payment now increase in line with the consumer prices index (CPI). Before April 2011 increases had been linked to the retail prices index (RPI). This change could make a substantial difference in the long term. For example, in April 2012 S2P pensions rose by 5.2%, based on the CPI to September 2011. Had the corresponding RPI figure been used, the increase would have been 5.6%.
The future of S2P
In recent years, S2P has been subject to several major changes. The theoretical overall result is that with no further changes, based on 3.5% annual earnings growth by around 2042 S2P will become a purely flat rate scheme producing a pension equivalent to around £4,600 a year in today’s terms. In practice this long-term transformation will not happen. In the 2012 Budget the Chancellor confirmed that a new single tier pension, replacing both S2P and the basic state pension, will be introduced for new pensioners early in the next parliament. The target total income from this, in current terms, is around £7,400 a year, i.e. enough to mean the recipient cannot claim the standard minimum guarantee under pension credit.Last Updated
