Pensions (Hansard, 3 February 1998)

§ Mr. Denham

[holding answer 26 January 1998]: For most people security in retirement comes from having two pensions, the basic State pension and a secure, funded second pension. That is why the Government have set out 621W clearly our plans for developing new Stakeholder Pensions for those who cannot join an occupational scheme or for whom personal pensions are not suitable. We will publish an initial framework for change in the first half of this year.

In the tax year 1995–96, the latest year for which figures are available, the estimated number of people in Great Britain aged 16 to 29 was 11 million¹. Of these, 5.1 million accrued no rights to a second tier pension, in most cases because they were in full-time education, employed with low earnings, unemployed or caring for children. The remaining people accrued pension rights as follows²2.6 million people accrued rights under the State Earnings Related Pension Scheme (SERPS) based on their full National Insurance Contributions³. 1.8 million people were in a contracted-out occupational pension scheme⁴. 2.1 million people held Appropriate Personal Pension (APP) plans⁵. ¹ Source: Mid 1995 estimate from the Office for National Statistics (ONS) Population Estimate Unit. ² Source: Numbers accruing rights to second rights to second pensions are from the Lifetime Labour Market Database, a 1 per cent. sample of the National Insurance Recording System taken at February 1997. Figures are rounded to the nearest hundred thousand. People may accrue rights to more than one type of pension. ³ A further 2.7 people accrued negligible amounts of SERPS. These were mainly people who chose to contract out of SERPS into other second tier provision. Also, prior to the 1995 Pensions Act provisions which changed the SERPS formulae for awards from April 2000, it was possible for the self-employed and those paying voluntary contributions to accrue small amounts of SERPS. ⁴ Figures are not available for the number of people accruing rights in occupational pension schemes not contracted out of SERPS. ⁵ An APP plan is a personal pension used to contract out of SERPS. This figure includes 0.7 million people where no minimum contributions were made by the Department into the plan in 1995–96. Figures are not available for the number of people accruing rights in non-appropriate personal pensions, i.e., personal pensions not contracted out of SERPS.