HC Deb 11 July 2002 vol 388 c1147W
Mr. Hogg

To ask the Secretary of State for Work and Pensions if he will estimate the value of the assets, including pension funds, which(a) a man aged 65 and (b) a woman aged 60 years would need in order to receive a higher income than if they had no such assets. [67226]

Mr. McCartney

The value of assets needed for the individuals described will depend upon the level of entitlement to state pension benefits that have been built up over the individuals working lives.

For illustrative purposes, the following estimates can be made for a man aged 65 who has built up rights to a full single basic state pension but has no other sources of income. At current market rates assets of about £14,000 or more are currently needed to purchase an annuity that generates a higher income level than if he had no such assets. The equivalent figure for a woman aged 60 is approximately £17,000. In practice, it is common for someone with full basic state pension entitlement to also have additional income from SERPS but this has been excluded in the above illustration.

From October 2003, the introduction of the pension credit will mean that these levels will fall to zero. Any individual with a full basic state pension who has saved for their retirement will have a higher income from doing so, regardless of the amount of this saving.

These estimates use current 2002–03 single rates for the basic state pension and minimum income guarantee, and the most favourable annuity rates quoted by The Annuity Bureau as at 4 July 2002 for an index-linked annuity with spouses benefits. It is assumed that the full pension pot is annuitised and no tax-free lump sum is taken.