Pensioners: Growth of Income (Hansard, 26 March 1987)

§ Lord Gridley
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Baroness Trumpington
MyLords, pensioners' total average net income grew in real terms by almost 18 per cent. between 1979 and 1985, the latest date for which figures are available.

§ Lord Gridley
My Lords, while I thank my noble friend for that Answer, may I ask her how the growth in pensions compares with the incomes enjoyed by the population as whole?

§ Baroness Trumpington
My Lords, between 1979 and 1985 pensioners' total average net incomes grew more than twice as fast as the incomes of the population as a whole and about four and a half times as fast as they did during the period 1974 to 1979. At 1985 prices pensioners' incomes were £83.10 a week in 1985, an increase of £12.50 over the 1979 figure. These figures are averages for pensioner tax units which may be single pensioners or married couples. The average net income of pensioner couples in 1985 was £115.30.

§ Lord Renton
My Lords, can my noble friend say whether the figures that she has been giving take account of the very considerable increase in occupational pensions which people who have retired have received in recent years?

§ Baroness Trumpington
My Lords, in answer to my noble friend, the figures show that pensioners generally do not have just the basic pension. Seventy per cent. have income from savings; over half have occupational pensions; 6.5 million have graduated pensions. However, for those who have only the basic pension, or little more, help is available through supplementary benefit and the housing benefit. The overall picture is one of steady improvement in pensioners' incomes at all levels.

§ Baroness Jeger
My Lords, can the Minister say whether in calculating the net income the Government are relating the figures to the retail price index or to the pensioners' index? Is it not a fact that the retail price index does not include housing? Since 1983 over half a million pensioners have lost housing benefit. Under the new regulations, from next month over 2½ million pensioners will lose housing benefit, in addition to being forced to pay 20 per cent. of rates out of supplementary benefit. In view of these facts there is no room for complacency about these figures.

§ Baroness Trumpington
My Lords, we are never complacent. The figures that I quoted come from the family expenditure survey, a well respected survey on household incomes.

§ Lord Banks
My Lords, will the noble Baroness say how the Government intend to ensure that state pensions do not decline in the future as a percentage of national average earnings, in view of the Government's own assumption that earnings will rise faster than prices?

§ Baroness Trumpington
My Lords, as the figures show, pensions will continue to be protected against inflation. The changes made to SERPS will not affect anyone retiring this century. The modification of the scheme was necessary if future generations were not to face a SERPS cost of some £28 billion extra by the year 2033. The changes introduced in the 1986 Social Security Act will make it easier for people to build up occupational or personal pensions in line with the Government's policy of extending flexibility and improving individual choice in pension provision.

§ Lord Renton
My Lords, in addition to the improvements which my noble friend has already mentioned, is it not a fact that pensioners will benefit further from the reduction in the standard rate of tax and in the improvement in the allowances?

§ Baroness Trumpington
My Lords, in answer to my noble friend Lord Renton, pensioners will benefit from the general improvement of the economy. Those pensioners who pay tax—only about a third of elderly households—benefit from the reduced basic rate of tax, like anyone else. However, two measures in the Budget were aimed specifically at helping pensioners: the increase in the age allowance and the introduction 296 of a new, higher rate of age allowance for people aged 80 or over.

§ Lord Hatch of Lusby
My Lords, can the noble Baroness tell the House what difference there would have been in the present pension if this Government had not delinked that pension from the average wage in the country? What would the difference in the figures that she has given have been if the criteria of 1979 had continued to be followed instead of being abandoned by this Government?

§ Baroness Trumpington
My Lords, if the noble Lord is referring to paying pensions of half average earnings for a married couple and a third for single people, the cost of increases in basic pensions to half average earnings for a married couple and a third for a single pensioner would be very high—£13.5 billion extra. Even increases to £86 and £57, as the national pensioners' convention demands, would cost £9 billion. But in fact when pensioners' total incomes are taken into account these targets are already passed. It is quite misleading to think of the basic pension as the only source of a pensioner's income when in fact it accounts for only about half of it.