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State Earnings-Related Pension Scheme

Volume 82: debated on Monday 1 July 1985

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asked the Secretary of State for Social Services if he will provide a breakdown of the estimated cost-savings arising from the proposed phasing out of the state earnings-related pension scheme in each year from 1987 to 2035.

I refer the hon. Member to my reply to the hon. Member for Pontypridd (Mr. John) on 27 June at column 484.

asked the Secretary of State for Social Services what percentage of band earnings (a) a man and (b) a woman on national average earnings would receive in earnings-related pension (additional component) if they had contributed to the state earnings-related pension scheme for (i) 20 years, (ii) 25 years, (iii) 30 years, (iv) 35 years and (v) 40 years.

The amount of additional component payable to (a) a man and (b) a woman who had consistently received earnings at a level equivalent to the national average would be (a) 19 per cent. and (b) 17 per cent. if based on national average earnings in the year of retirement after 20 years in the scheme. As the scheme reaches maturity in 20 years, participation in the scheme for periods in excess of that would not affect the relationship between earnings and the additional component.

asked the Secretary of State for Social Services if, under the Green Paper proposals on social security, those with fluctuating earnings who currently create an adequate record of contributions for the state earnings-related pension scheme will be eligible for an occupational pension with employer contributions.

We are considering in the course of consultations on the Green Paper how the new pension arrangements should apply to casual workers and those whose earnings only occasionally exceed a minimum level (probably the lower earnings limit for national insurance contributions). An aim in this will certainly be to include in the general requirement those whose earnings would have qualified them for benefit under the state earnings-related pension scheme.

asked the Secretary of State for Social Services what will be the level for persons retiring in each of the next 15 years, on male manual average earnings, of the additional earnings-related component they will receive if they are contracted into the state earnings-related pension scheme; and if he will estimate the cost each year of crediting in existing pensioners at this level or by some comparable criterion.

[pursuant to his reply, 20 May 1985, c. 329–30]: The table gives a broad estimate of the amount of additional earnings-related component that would be paid to a person retiring in each of the next 15 years whose earnings had been at the level of the average for male manual workers for each year since 1978. These amounts are expressed in terms of 1984/85 earnings.

£
1985–8611·50
1986–8713·05
1987–8814·55
1988–8916·05
1989–9017·55
1990–9119·10
1991–9220·60
1992–9322·10
1993–9423·65
1994–9525·15
1995–9626·65
1996–9728·15
1997–9829–70
1998–9931·20
and later(rounded to nearest 5p)
(Based on new earnings survey full time male manual earnings).To provide detailed estimates of the total cost for a scheme for crediting in existing pensioners at these levels for each year would incur disproportionate costs but illustrative figures for the extra expenditure involved, expressed in terms of, 1984–85 prices, can be given for certain years:

£bn*
1985–864
1993–9411½
2003–0414½
*The final cost would be lower as there would be savings of supplementary benefit and housing benefit which cannot be quantified except at disproportionate cost.