§ Mr. FlightTo ask the Secretary of State for Work and Pensions if he will re-calculate the figures in the table in the answer of 27 June 2002,Official Report, column 1050W, assuming (a) that the fund remains in equities until the annuity is purchased and including also figures assuming retirement on 31 December 2001 and 30 September 2002, (b) retirement on (i) 31 December 2001 and (ii) 30 September 2002 and (c) that the fund remains in equities until five years before the annuity is purchased when half is satisfied into gilts and the remainder remains in equities until retirement, including figures assuming retirement on 31 December 2001 and 30 September 2002 [83135]
§ Mr. McCartneyThe available information, is in the tables. Table 2, includes the data underlying the graph on page 19 of 'Modernising Annuities' published by Inland Revenue and the Department for Work and Pensions in February 2001.
It is not possible to provide information, where the date of retirement is after December 2001. This is due to data and model restrictions.
Although a stylised model, it is the data in the second table that we believe best characterises the investment strategy of many pension funds.
Investors will also be interested in expected pension income throughout their retirement and not just the income in the first year. The information does not give an indication of how this first figure may have increased for successive cohorts of pensioners due to increased life expectancy.
The following assumptions have been made.
917WA person contributes to a pension fund for 31 years;Contributions are made at 10 per cent, of gross earnings;Earnings in each year are £20,000 in 2000 earnings terms. The earnings growth index was supplied by the Office for National Statistics;50 per cent, of each year's contributions are made at the start of each year and 50 per cent, at the end of each year;The return on equities is in line with the FTSE 30. The same figures were used as PQ61084 to enable consistency with that answer;The return on gilts is in line with the Barclays Capital Total Return Index. The same figures were used as PQ61084 to enable consistency with that answer;A 1 per cent, fee is deducted at the end of each yearUpon retirement on 31 December of the given year, an annuity is purchased at the prevailing rate in that year, and as indicated in the tables. The source of this Annuity Direct.
Table 1—pension entitlement assuming the fund remains in equities in all years Year started contributing Retire at end of year Years of contribution Lump sum built up (cash terms) (£) Lump sum in 2000 earnings terms (£) Annuity rate in last year of contribution (percentage) Pension at retirement (nominal terms, weekly) (£) Pension at retirement (2001 earnings terms, weekly) (£) 1967 1997 31 71,040 81,762 10.4 141 163 1968 1998 31 85,598 93,743 9.4 155 169 1969 1999 31 80,168 83,738 8.9 138 144 1970 2000 31 85,438 85,438 9.1 149 149 1971 2001 31 83,928 80,340 8.9 143 137
Table 2—pension entitlement assuming the fund switches from equities to gilts over the last 10years of growth. An extra 10 per cent, is invested in gilts in each successive year Year started contributing Retire at end of year Years of contribution Lump sum built up (cash terms) (£) Lump sum in 2000 earnings terms (£) Annuity rate in last year of contribution (percentage) Pension at retirement (nominal terms, weekly) (£) Pension at retirement (2001 earnings terms, weekly) (£) 1956 1986 31 19,209 42,037 14.1 52 114 1957 1987 31 20,987 42,625 14.0 56 115 1958 1988 31 21,803 40,693 13.7 57 107 1959 1989 31 26,910 46,074 14.0 72 124 1960 1990 31 28,666 44,707 15.2 84 131 1961 1991 31 35,404 51,291 14.6 99 144 1962 1992 31 40,730 55,695 13.2 104 142 1963 1993 31 46,840 62,203 11.7 106 140 1964 1994 31 49,102 62,921 11.6 109 140 1965 1995 31 53,289 66,238 11.3 116 144 1966 1996 31 56,810 68,161 11.0 120 145 1967 1997 31 61,245 70,488 10.4 122 140 1968 1998 31 71,329 78,116 9.4 129 141 1969 1999 31 79,658 83,206 8.4 137 143 1970 2000 31 75,946 75,946 9.1 133 133 1971 2001 31 72,927 69,810 8.9 124 119
Table 3—pension entitlement assuming that 50 per cent, of the fund is invested in gilts in each of the last five years of growth Year started contributing Retire at end of year Years of contribution Lump sum built up (cash terms) (£) Lump sum in 2000 earnings terms (£) Annuity rate in last year of contribution (percentage) Pension at retirement (nominal terms, weekly) (£) Pension at retirement (2001 earnings terms, weekly) (£) 1956 1986 31 20,109 44,007 14.1 54 119 1957 1987 31 25,475 51,741 14.0 68 139 1958 1988 31 23,487 43,835 13.7 62 116 1959 1989 31 29,432 50,391 14.0 79 136 1960 1990 31 29,460 45,946 15.2 86 135 1961 1991 31 33,095 47,946 14.6 93 135 1962 1992 31 34,374 47,005 13.2 87 120 1963 1993 31 41,056 54,521 11.7 92 123 1964 1994 31 44,523 57,054 11.6 99 127 1965 1995 31 46,351 57,614 11.3 101 126 1966 1996 31 52,045 62,444 11.0 110 132 1967 1997 31 57,518 66,199 10.4 114 132 1968 1998 31 67,337 73,745 9.4 122 133 1969 1999 31 74,250 77,556 8.9 128 133 1970 2000 31 69,928 69,928 9.1 122 122 1971 2001 31 61,342 58,720 8.9 105 100