Pensions (Hansard, 6 November 2002)

§ Adam Price
To ask the Secretary of State for Work and Pensions what recent assessment he has made of the cost of reintroducing the link between the state pension and average earnings. [79765]

§ Mr. McCartney
Reintroducing the earnings link does nothing to help poorer pensioners. To do so would cost around £410m net in 2003–04 in today's prices. However, we will be spending an extra £6bn a year in real terms on pensioners as a result of policies introduced since 1997. This includes £2.5bn more on the poorest third of pensioners. This is three times more than an earnings link since 1998 would have given them.
Increases in the basic State Pension over the last two years have given single pensioners £2.10 a week more than an earnings link would have given them and £3.35 more for couples.
Note:
The costs of increasing the basic State Pension by earnings are in 2002–03 prices, rounded to the nearest £10m.

§ Mr. Gardiner
To ask the Secretary of State for Work and Pensions if he will estimate the(a) net cost of linking pensions to earnings and (b) surplus in the National Insurance Fund in (i) 2000 and (ii) 2010. [79362]

§ Mr. McCartney
The net cost to Government of increasing the basic State Pension by earnings, after taking account of savings in income-related benefits would be around £410 million in 2003–04 in 2002–03 prices.
The surplus in the National Insurance Fund for the year ending 31 March 2000 was £2,161m. Long-run projections of the National Insurance Fund are contained in the report by the Government Actuary on the costs of uprating the basic retirement pension in line with the general level of earnings (CM 4920).
Notes:
1. The net cost of increasing the basic State Pension by earnings is, in 2002–03 prices, rounded to the nearest £10m.
2. The Government Actuary's Department provides estimates of the cost to the National Insurance Fund of increasing the basic State Pension by earnings. Net costs are calculated using the DWP Policy Simulation Model.
3. The surplus in the National Insurance Fund for Great Britain is taken from National Insurance Fund accounts and is in cash terms, showing the excess of receipts over payments.