HC Deb 06 December 1989 vol 163 cc254-5W
Mr. Flynn

To ask the Secretary of State for Social Security whether he will publish a table showing, for men and women aged 16, 20, 30, and 40 years in April 1988, the ages at which it would pay the person concerned to cease contributing to a personal pension or other money purchase scheme, assuming rates of return of 0.5 per cent. and 2.5 per cent. above the annual increase in average earnings and, in other respects, making the same assumptions as were made in calculating the similar figures given in the letter dated 10 October from the Parliamentary Under-Secretary of State for Social Security to the hon. Member for Derby, South (Mrs. Beckett).

Mrs. Gillian Shephard

The table provides the first age at which the projected pension from the invested rebate is less than the corresponding GMP. These estimates are critically dependent on a number of illustrative assumptions which should not be taken as predictions of what future policy might be. These are:

  1. (i) the contracted-out rebate for illustrative purposes only is assumed to be 5.8 per cent. of earnings between the lower and upper limits for NI contributions, declining to 3.75 per cent. by 2018;
  2. (ii) the lower and upper earnings limits are assumed to increase in future in line with prices;
  3. (iii) the contracted-out rebate is boosted by a 2 per cent. incentive addition for personal pensions and newly contracted-out occupational schemes up to 1992–93;
  4. (iv) men are assumed to take their pension at 65, women at 60.

First age at which the projected pension from the invested rebate is less than the corresponding GMP
Personal pension rate of return1 Money purchase rate of return1
Age at April 1988 ½ per cent. 2½ per cent. ½ per cent. 2½ per cent.
16 31 49 36 54
20 34 50 36 54
30 35 50 40 53
40 45 48 45 50
16 21 38 24 42
20 25 40 25 43
30 35 41 35 45
40 40 45 40 45
1 Rates of return are in excess of increase in earnings.

Source: Government Actuary's Department.