Earnings-related accruals of state second pension would be tapered away by around 2030 by freezing the national insurance upper earnings limit, for the purpose of state second pension accruals, in cash terms from the point at which earnings uprating of the basic state pension as proposed in the White Paper is introduced. Earnings-related accruals built up under the state earnings-related pension scheme and/or the state second pension prior to 2030 would be fully protected and would continue to be revalued in line with earnings from that date. The combination of our proposals to ‘flat-rate’ accruals of the state second pension and earnings uprate the basic state pension would ensure that the state pension outcomes for people reaching state pension age after 2030 would not be reduced. The following table shows examples of the state pension outcomes for individuals under the proposed reforms.
Low earner (c £12,000 a year) Median earner (c £23,000 a year) High earner (c £33,000 a year) Under Reform (2053) Basic State Pension 73 73 73 State Second Pension 61 66 67 Total State Entitlement 134 139 140 Without Reform (2050) Basic State Pension 33 33 33 State Second Pension 56 67 69 Total State Entitlement 89 100 102 Notes: 1. Figures have been expressed in 2005-06 earnings terms and reflect the valueof pension entitlement in 2050 or 2053 relative to expected changes in the levelof average earnings over time. 2. We have assumed that standard rate class 1 national insurance contributions have been paid or treated as paid over a working/caring life of around 40 years, from age 25 to state pension age.