§ Mr. FlightTo ask the Secretary of State for Work and Pensions what the replacement ratio is by(a) state pension only, (b) state pension and SERPS and (c) state pension, SERPS and private pension provision. [99980]
§ Mr. McCartneyAn individual's replacement rate depends upon a number of factors, including past saving behaviour, employment history, earnings profile, private pension provision, investment returns and date of retirement. Depending on earnings, income-related benefits are also available such as MIG and Pension Credit. Figure 2.7 in the recent Green Paper (Cm 5677) shows replacement rates from the state in 2050 as a percentage of weekly average earnings. The Government's strategy is to focus resources on those pensioners who need them the most. As a result, those with low lifetime incomes will have higher replacement rates provided by the state.
The Government have no specific objective on earnings replacement. It is the responsibility of individuals, where possible supported by their employers, to determine the level of income in retirement they want over and above that provided by the state system. Given their state income, figure 2.8 in the Green Paper (cm 5677) estimates the weekly contributions an individual and their employers would need to make to a private pension for the individual to retire on either half or two-thirds of their final salary in 2050.
The assumptions underlying figures 2.7 and 2.8 are detailed in Annex 5 of the Green Paper (Cm 5677) and in the figures' accompanying footnotes.