HC Deb 25 October 1999 vol 336 cc725-7W
Mr. Flynn

To ask the Secretary of State for Social Security what plans he has to ensure that all pensioners receive pension increases which are linked to increases in national prosperity. [93777]

Mr. Rooker

My right hon. Friend the Secretary of State for Social Security is required by law to review the rate of Retirement Pension and other benefits each year. He will announce the outcome later this year in the usual way.

Mr. Webb

To ask the Secretary of State for Social Security if he will estimate, using his PENSIM model, the mean net incomes in 2025 of(a) single pensioners and (b) married pensioners on the basis of (i) unchanged policies, (ii) his proposed phased replacement of SERPS with the second state pension and (iii) the phasing out of SERPS coupled with the introduction of an age addition to the basic pension for those aged 80 years or over, set at three quarters of the gap between the basic pension and the minimum income guarantee, assuming in each case the continuation of earnings indexation of the minimum income guarantee; and if he will provide separate estimates for each quintile group of each distribution. [94695]

Mr. Rooker

The information is in the tables:

Net income of single pensioners by quintile in 2025
£ per week
Mean Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5
Unchanged policies
168.00 85.20 119.70 139.00 172.70 323.50
After the State Second Pension
169.70 86.50 121.10 140.30 174.70 325.70
After the suggested age addition to the Basic State Pension and phasing out of SERPS
172.00 92.30 124.50 144.40 177.10 321.50

Net income of married pensioners by quintile in 2025
£ per week
Mean Quintile I Quintile 2 Quintile 3 Quintile 4 Quintile 5
Unchanged policies
346.70 169.50 221.00 275.30 356.90 710.50
After the State Second Pension
351.40 172.40 226.00 280.30 362.10 716.00
After the suggested age addition to the Basic State Pension and phasing out of SERPS
342.20 171.80 224.20 271.30 347.40 695.60

Notes:

  1. 1. In order to model option (iii), it is necessary to make further critical assumptions about the current regime for contracting out of SERPS. If this were to cease at the same time that SERPS stops accruing, there would be a significant effect on private pension provision although highly dependent on the behavioural response of individuals and employers. Alternatively, if contracted out rebates continued to be available, there would be a large incentive for those who had previously been in SERPS to take advantage of the rebates, at significant extra cost to the public finances. Again this would depend on behavioural responses, unless private second pensions were made compulsory. The estimates in the table are based on assumptions which avoid the need to model behavioural responses ie those who are already contracted out continue to receive their rebates, whereas those in SERPS have no replacement second pension once SERPS accruals cease. This is not a sustainable set of assumptions in policy terms, but does provide a basis for answering the question as set out.
  2. 2. The estimates have been arrived at using the DSS's PENSIM model. PENSIM is a dynamic microsimulation model which projects future pensioners' incomes on the basis of past labour market and pensions information. Because the model is dependent on the assumptions used and the cohort sampled to generate the work and pensions histories, it is primarily a tool to compare policy options rather than to project the future course of pensioners' incomes with accuracy. Results so far into the future, even of a comparative nature, must be treated as broad brush.
  3. 3. The quintiles have been derived by dividing each income distribution in to five equal sized groups in ascending order of income size. The first quintile contains the fifth of the distribution with lowest incomes while the fifth quintile contains the fifth with highest incomes.
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  4. 4. The income figures given are on a benefit unit basis. Therefore, the income of couples is that of both members of the couple combined.
  5. 5. Figures are expressed in 1999 prices rounded to the nearest ten pence.
  6. 6. Earnings indexation of the minimum income guarantee is assumed. The earnings assumption in the PENSIM model is 1.5 per cent. per year above inflation.
  7. 7. The State Second Pension is assumed to be introduced in 2002.
  8. 8. The suggested age addition to the Basic State Pension refers to three quarters of the gap between the full basic state pension and the maximum minimum income guarantee of a single person aged 80. It is assumed to be introduced in the year 2000. Under this option, the year 2000 also marks the end of all new SERPS accruals. Existing SERPS entitlements continue to be paid.

Mr. Trend

To ask the Secretary of State for Social Security (1) what plans he has to seek an amendment to the law to require a stakeholder pension to be taken out in the form of an annuity by a specified age; and if he will make a statement; [94930]

(2) what plans he has to seek an amendment to the law to prevent any pension scheme from requiring a person to take out a pension in the form of an annuity by a specified age; and if he will make a statement. [94929]

Mr. Rooker

Only pension schemes which are not themselves able to pay a pension require their members to take pension benefits in the form of an annuity, so as to guarantee a pension income throughout retirement. We propose that this should also apply to stakeholder pensions. We will consider whether there is a case for changing the present age 75 limit for annuity purchase as part of the review of personal pension income withdrawal being undertaken by the Inland Revenue.