Legacy state pension scheme still costs taxpayers £11.8bn annually

Figures obtained under the Freedom of Information Act reveal that the Department for Work and Pensions is still paying £11.8 billion annually to roughly 6.6 million claimants of the State Earnings-Related Pension Scheme (SERPs), which stopped accepting new contributions in 2002. The average annual payment is about £1,778, or £34 a week. SERPs was succeeded by the State Second Pension in 2002 and later by the new flat-rate state pension in 2016, but the reforms did not erase rights already earned, so legacy payouts persist.

Around 3.7 million people hold both SERPs and S2P rights, and another 158,600 receive additional entitlements alongside the new pension due to transitional protections. Analysts compare the slow wind-down to steering a super-tanker, emphasizing that pension reforms unfold over many years. While SERPs accounts for less than 8 percent of total state pension spending, the cost could have risen sharply without the 2016 overhaul, according to former pensions minister Sir Steve Webb.