§ Mr. Marlowasked the Secretary of State for Social Services how the system of index-linking retirement pensions operates.
§ Mrs. ChalkerMy right hon. Friend is required by the provisions of the Social Security Act 1975, as amended, to carry out a review of retirement pension rates in each tax year, to determine whether they have retained the value which they had at the time of the last uprating of pensions in relation to the general level of prices. If they have not, he is required to increase them by at least as much as he thinks will be necessary to restore their value. The increase must come into effect not later than the end of the month in which the first anniversary of the previous uprating falls.
The review is normally carried out shortly before the Budget Statement and the resultant increases are put into payment in the following November. For the purpose of determining the amount of the increases, it is therefore nesessary to make an estimate of the likely movement of prices over the period between the two upratings.
As my right hon. and learned Friend the Chancellor of the Exchequer told the House in his statement on 24 November, it is proposed to amend the statutory provisions to provide that the increase in pensions at the 1981 uprating will take account of the fact that this year's increase in pensions was more than was necessary to restore their value. A similar abatement will apply to other benefits.