The First Year of Contracting-Out

The new Earnings-Related State Pension Scheme was introduced, under the terms of the Social Security Pensions Act, 1975, on 6th April, 1978. The arrangements represented the product of more than fifteen years' efforts to establish a meaningful earnings-related supplement to the flat-rate basic State pension. Various proposals had been mooted, the first of which was probably the Graduated Pension Scheme, introduced in 1961, which was followed by the Crossman and Joseph schemes. The latter two schemes fell foul of changes of government and it was not until 1975 that the joint efforts of Barbara Castle and the late Brian O'Malley reached fruition in the Social Security Pensions Act 1975. The Earnings-Related State Pension Scheme embodied in the Social Security Pensions Act 1975 ultimately received the approval of all the major political parties. It provides an earnings-related pension over and above the flat-rate basic State pension for all employees except those who reach pensionable age (65 for men, 60 for women) in the fiscal year commencing 6th April 1978 or married women (or widows) who have opted to make National Insurance contributions at the reduced rate and, therefore, not participate for retirement benefits from the State Scheme.