Skip to main content

Earnings Rule

Volume 990: debated on Thursday 7 August 1980

The text on this page has been created from Hansard archive content, it may contain typographical errors.

asked the Secretary of State for Social Services (1) if he will now estimate the cost of abolition of the earnings rule for retirement pensioners;(2) if he can now estimate the cost of abolition of the earnings rule for retirement pensioners.

As I said during the Committee stage on the Social Security (No. 2) Bill on 7 May—[Standing Committee B; c. 758]—we have been reviewing the assumptions underlying the estimates of the cost of abolishing the retirement pensioners earnings rule, set out in the report on the earnings rule, which was presented to the House by my predecessor in October 1978.Crucial factors have been the full evidence about the likely effects of abolition on working patterns in the report "Older Workers and Retirement", published by OPCS in April, and up-to-date information about trends in economic activity after pension age. These have provided the basis for revised assumptions.From these revised assumptions we estimate that, at 1979 survey prices, the cost to the national insurance fund of abolition would be about £110 million in a full year. This would be offset by about £65 million from increased revenue from taxes and national insurance contributions, giving a net cost to public funds of about £45 million. This compares with the estimated net cost in the 1978 report of about £100 million, when updated to 1979 survey prices. Both these estimates assume the continuation of increments to pensions for deferred retirement and that 20 per cent. of those deferring retirement at the time of abolition will continue to forgo their pension. It will be necessary to consider in due course a number of changes to other features of the national insurance scheme consequent upon the ending of the earnings rule—for example, the future role of increments.