§ Mr. Tim Rentonasked the Secretary of State for Social Services if he will publish in the Official Report his correspondence with the hon. Member for Mid-Sussex of 15th June 1978 concerning inflation and social security benefits.
§ Mr. OrmeThe letter which I sent to the hon. Member on 15th June 1978 is reproduced below, together with a previous letter to which reference is made.
Because of the Department's rule on confidentiality, the name and address of the hon. Member's constituent have been omitted.
27 May 1976
Thank you for your letter of 4 May addressed to David Ennals enclosing a copy of one from [your constituent] about his retirement pension.As [your constituent] appreciates, the national insurance scheme is basically a contributory one in which the benefits given depend upon certain contribution conditions being satisfied. He accepts that because of a deficient contribution record—due to his late entry into insurance—he receives a reduced rate of basic pension, but he does not understand why, when pensions are up-rated, he does not receive the full amount of the increase.When pensions are increased, people with pensions at a lower rate than standard get the same percentage increase as with the standard rate, although this means that they get a lower cash increase. In this way the lower rate pensions are kept in step with standard rate pensions.To increase all pensions by the same cash amount would be unfair to pensioners with standard rate pensions who had main- 622W tamed a full contribution record, sometimes with considerable difficulty, and to pensioners retiring now with lower rate pensions.An example will illustrate this. If a person retiring with a pension at the lowest rate of £1.40 in 1969 had received the same cash increases since then as a pensioner who, at the same time, had retired with a pension at the standard rate of £5.00, these pensions would now be £9.70 and £13.30 respectively. The lower rate pension would have gone up from 28 per cent. to almost 73 per cent. of the standard rate. On the other hand a person retiring now with a contribution record giving him 28 per cent. of standard rate would receive only £3.72.I understand [your constituent's] disappointment at not receiving the full amount of pension increases but I hope he will find this explanation helpful.15 June 1978
Thank you for your letter of 3 May addressed to David Ennals enclosing a copy of a further letter from [your constituent] about his retirement pension.There is very little I can add to my letter of 27 May 1976 when I set out the reasons for giving all pensioners the same percentage increase in pension. I enclose a copy of that letter for your information.The Government's view remains the same. The amount of the pension increase is based on the rise in the general level of earnings or prices, whichever is the most advantageous to pensioners, and it would be unfair to give pensioners with a reduced rate pension a higher percentage increase than those who have maintained a full contribution record and so qualified for a full pension.In November 1978 [your constituent's] pension will be increased by just over eleven per cent. at a time when prices are only expected to rise by about seven per cent. His pension will therefore have increased in real value by about four per cent.