HC Deb 20 April 2000 vol 348 cc608-9W
Mrs. Lait

To ask the Secretary of State for Social Security, pursuant to his answer of 21 March 2000,Official Report, columns 477-78W, on Government pensions liability, what is the Government's liability in each case in each of the years referred to as a percentage of estimated gross domestic product assuming that gross domestic product increases in real terms at (a) 1.5 per cent. per annum and (b) 2 per cent. per annum. [120066]

Mr. Rooker

The information is in the table.

With real GDP growth of 1.5 per cent. per year pension expenditure is estimated to increase as a proportion of GDP between 2000–01 and 2030–31, from 4.3 per cent. to 4.7 per cent. After 2030–31 the proportion of GDP represented by pension expenditure falls, from 4.7 per cent. to 3.8 per cent. by 2050–51.

With real GDP growth at 2.0 per cent. per year pension expenditure as a proportion of GDP follows a more general pattern of decline, from 4.3 per cent. in 2000/01 to 3.0 per cent. in 2050–51. This more general pattern of decline is wholly attributable to the faster increase in GDP.

Government's pensions liability as a proportion of GDP assuming real growth of 1.5 per cent. per annum, 2.0 per cent. per annum in GDP
Year Real GDP growth of 1.5 per cent. Real GDP growth of 2.0 per cent.
2000–01 4.3 4.3
2005–06 4.3 4.2
2010–11 4.5 4.2
2015–16 4.5 4.1
2020–21 4.4 3.9
2030–31 4.7 4.0
2040–41 4.4 3.6
2050–51 3.8 3.0


1. The figures have been calculated using the following assumptions: Total pension expenditure is the sum of expenditure on SERPS, State Second Pension, and the Basic State Pension.

SERPS expenditure is based on the assumption that State Second Pension is introduced in 2002 and so any SERPS expenditure after that date is on earlier accruals.

SERPS expenditure does not include the effects of the Inherited SERPS scheme and accompanying deferral announced on 15 March 2000.

State Second Pension expenditure assumes the scheme becomes flat rate from 2006 onwards, when Stakeholder pensions are established. From 2006 everyone aged under 40, and earning over £9,500 (in 1999 earnings terms) chooses to contract out of State Second Pensions. Contracting out is based on the proposals contained in the current Bill.

Increases in contracted out rebates as a result of introducing State Second Pension and Stakeholder pensions are not included in expenditure figures.

2. Expenditure figures are consistent with those in the Government Actuary Department's report on the Child Support, Pensions and Social Security Bill 1999.

3. GDP for future years is estimated by taking the figure for 19992000 and uprating it. GDP figures are often subject to revision in later years, and because of the long time horizon over which projection is undertaken the effects of any error corrected in a subsequent revision will be magnified.


Pension costs from GAD, base GDP figure from ONS.