§ Lord Mottistone
asked Her Majesty's Government:
How long a man of 70, commencing to receive the state pension because of the earnings rule, would have to stay alive to enable the discounted value of his increased benefits to equal the pension he has forgone over the previous five years; and how this compares with his actuarial life expectancy.
§ Baroness Trumpington
The rate at which increments to retirement pensions are paid does not vary with sex, marital status or the length of period of deferment of pension. It is intended to give a result which is broadly fair across the population as a whole, rather than an actuarially-calculated return in individual cases. On average, men defer taking pension for only about five months, and in the 12-month period to September 1986, only about 2 per cent. of pensions awarded were to men receiving increments for deferment for four and a half to five years.
At current benefit rates, a single man aged 70 retiring this year would recover the cash value of pension forgone in 13.5 years, by way of the increment awarded. On the assumption that he had been able to invest the whole of the benefit forgone, it would 820WA however require a period of 20 years to enable the discounted value of increased pension to match the sum forgone, assuming an investment return of 3.5 per cent. above prices and the uprating of pensions in line with prices. The calculation is critically sensitive to those assumptions. The current life expectancy of a man aged 70 is 10 years.