On the 6 April 2002 the State Second Pension was introduced and the State Earnings Related Pension Scheme (SERPS) tooks its final curtain call.
The State Second Pension is a much more generous pension for the lower paid, in addition to the Basic State (or old age) Pension. Under the new State Second Pension, anyone earning up to £3,900 can claim a second pension on earnings of £10,800.
Basically, as people do not pay tax or national insurance on earnings below £4,500 the extra pension benefit is a freebie from the Government!