Pensions (Hansard, 25 May 1989)

§ Mr. Atkinson
To ask the Secretary of State for Social Security what is the percentage increase from 1979 of(a) the state retirement pension, (b) the retail prices index and (c) the pensioner prices index.

§ Mr. Peter Lloyd
Between November 1979 and April 1989¹ the level of the state retirement pension increased by 87.1 per cent. Between November 1979 and September 19882 the retail prices index increased by 79.9 per cent. Between the quarter ending September 1979 and the quarter ending September 19883 the pensioner prices index (one person household) increased by 75.5 per cent.
Notes:
¹ Information given is for uprating dates.
² The level of retirement pension payable from April 1989 is based on the RPI figure for September 1988.
³ Pensioner prices indices (for both one-and two-person households) are produced quarterly.

§ Mr. Kirkwood
To ask the Secretary of State for Social Security if he has any proposals to change the present arrangements for payment of protected contributions for 1987–88 to private pension providers in respect of individuals who contracted out of the state earnings related pension scheme before 6 April; if he will give his latest estimate of the number of such individuals who contracted out during 1988–89 and backdated their election to 1987–88; by what date he expects 90 per cent. of relevant payments of 1987–88 protected contributions to have been made; if he will estimate the number and total value of such payments yet to be made; whether he will make it his policy to offer interest on late payment; and if he will make a statement.

§ Mr. Peter Lloyd
The current arrangements for payment of the contracted-out rebate to pension providers are working satisfactorily. Personal pension applications have been processed promptly, and payments made to providers in respect of sums due for 1987–88 within a very short period of time. The very heavy volumes received in the last few weeks, however, will inevitably lead to some delay.
It is estimated that approximately 3 million pensions have been taken out by the end of 1988–89, and the expectation is that nearly all of them have elected to backdate to the 1987–88 tax year. It is hoped that the vast majority of payments of the contracted-out rebate in respect of 1987–88 will have been made by the end of August. This will involve about a further 2 million 682W payments at an estimated total of £750 million in rebates. The payments will be made as quickly as possible, so the question of interest on late payments does not arise.

§ Mrs. Beckett
To ask the Secretary of State for Social Security how many employees are contracted out in defined benefit schemes, group money purchase schemes and personal pension schemes, respectively; and what would be the effect on the income and expenditure of the national insurance fund, in respect of each of these groups, of reducing the contracted-out rebate and the minimum contribution to personal pension schemes by 1 per cent. of relevant earnings.

§ Mr. Peter Lloyd
[holding answer 15 May 1989]: It is estimated that approximately 3 million personal pensions (PP) have been taken out by the end of 1988–89. There is no information currently available on the effects of the changes under the 1986 Act to the numbers of contracted-out members of occupational schemes. On the assumption that contracted-out scheme membership is broadly unchanged it is estimated that there are about 9.5 million members of schemes. On this basis, it is estimated that a 1 per cent. reduction in the rebate rate in 1988–89 would have reduced the PP rebates in respect of that year by approximately £185 million and rebates for scheme members by approximately £850 million.
Any effect on expenditure would depend upon precisely how the reduction in the rebate was reflected on the guaranteed minimum pensions (GMPs) which schemes have to provide in respect of contracted-out members, and in the notional GMPs which are deducted from SERPS benefits from those who have contracted-out money purchase or PP rebates.
A change in the balance between the value of the rebate and the benefits forgone may affect the numbers opting to contract out, but no allowance has been made for this in the figures given.
Source: Government Actuary's Department.