Inherited State Earnings Related Pension Scheme payments: how millions get an income boost

More than two million retirees receive a payment from an inherited State Earnings Related Pension Scheme (SERPS), with some earning an annual State Pension of more than £22,000 as a result.

Are you a widow or a widower? Did you know that you may be able to increase your State Pension through inheritance?

It may be worth checking to see if you are missing out on money that is due to you from your late spouse’s pension. 

Over 500,000 people have boosted their State Pension by more than £5,000 each year through inheritance, according to pensions provider Royal London.

Through a Freedom of Information (FOI) request submitted to the Department for Work and Pensions, Royal London discovered that some bereaved spouses have doubled their State Pension payments to over £22,000 a year through inheritance. 

Currently, surviving spouses and civil partners are entitled to inherit at least 50% of their late partner’s State Pension benefits, up to a maximum of £11,356 or £218.39 a week in the 2024/2025 tax year. 

This is in addition to their own State Pension and means that some pensioners now receive an annual State Pension of up to £22,858. 

Benefits from the old State Pension

Royal London’s FOI request found that more than two million retirees received a payment from an inherited State Earnings Related Pension Scheme (SERPS) in the 2023/2024 tax year. 

SERPS formed part of the previous State Pensions system, which was in place before 2016, enabling workers to build up an entitlement to additional State Pension payments. 

According to the data, over half a million (541,760) pensioners receive more than £5,000 annually from inherited SERPS payments, while 17,460 of those are claiming more than £10,000 a year. 

How much can you claim?

How much an individual can inherit is determined according to the date their spouse or civil partner passed away and their age at the time of their death. 

The average inherited SERPS payment in the 2023/2024 tax year, according to the FOI data received by Royal London, was £3,377 a year.

The pre-2016 State Pension was composed of two elements – the main, basic amount you could claim through accruing sufficient National Insurance credits, plus an additional earnings-related pension known as SERPS and replaced by the State Second Pension. 

Under the new State Pension system, these two schemes were abolished in April 2016. 

“This data shows how much of a difference inheriting a SERPS pension from your husband, wife or civil partner can make,” explained Sarah Pennells, Royal London’s consumer finance specialist. 

“The worry is that, while more than two million people are claiming inherited SERPS, others could be missing out.

“Understanding the rules is key to boosting your retirement income.

For the Additional State Pension, generally, 50% can be inherited by your husband or wife, although the rules are slightly different for people who reach State Pension age after April 2016. 

“However, a higher percentage can be passed on if the man was born before 6 October 1945 and the woman born before 6 July 1950.

“However, the rules also say that you can’t inherit any additional State Pension from your husband if they remarried or formed a civil partnership before they reached State Pension age.

“As we continue to adapt to the new system introduced in 2016, which focuses on individual entitlements, understanding the legacy of SERPS and its relevance for thousands of retirees remains crucial.

“If you’re in doubt about your inherited SERPS entitlements, then you should contact the Pension Service to find out what you should be receiving.”