Skip to main content

Pensions White Paper

Volume 449: debated on Tuesday 25 July 2006

To ask the Secretary of State for Work and Pensions if he will estimate the total number of pensioners who would receive savings credit under the current system but will not under the proposals in the White Paper security in retirement, towards a new pensions system in (a) 2010, (b) 2020, (c) 2030, (d) 2040 and (e) 2050. (78004)

Under our reforms, more people will be receiving state pensions based on their national insurance records, and there will be a more generous basic state pension due to the restoration of the earnings link. This provides a solid foundation for private saving. Incentives are further enhanced by reducing the growth of the savings credit.

The following table shows the difference between the number of pensioner households projected to be receiving savings credit in each year requested under the current system projected forward and under the proposals contained in the White Paper “Security in retirement: towards a new pensions system”. These figures do not take into account the effects of introducing personal accounts, which should lead to lower proportions of older people being eligible for pension credit.

Table 1: Projected numbers of pensioner households in selected years that may receive savings credit under the current system projected forward, and that may receive it under the white paper proposals

Number of pensioner households that may receive savings credit under the current system projected forward (million)

Number of pensioner households that may receive savings credit under the white paper proposals (million)

Difference

2010

2.40

2.05

0.35

2020

3.00

1.85

1.15

2030

4.00

1.60

2.40

2040

5.05

1.60

3.40

2050

6.15

1.70

4.45

Notes:

1. Projections of numbers receiving savings credit in the future are subject to a range of uncertainties and a number of factors including policies on uprating different benefits, and assumptions on rates of take-up.

2. The assumptions applied here are consistent with those that underpin published long-run expenditure projections, and are applied to projections of the number of pensioner households estimated to be eligible for the savings credit.

3. The projections of recipients of the savings credit under the current system and the reform proposals are calculated by applying assumed rates of take-up, care should be taken when interpreting these projections. In particular data deficiencies make it difficult to be confident in the split between the number of people who may be in receipt of only the guarantee credit and those who may be in receipt of both the guarantee credit and the savings credit. Also the projections are sensitive to the assumed take-up rates.

4. Estimates of the proportion of pensioner households eligible to the savings credit are the mid-points of projections taken from two separate micro-simulation models. Modelling of the reform proposals does not assume any increase in private saving from the introduction of personal accounts, which would further reduce the numbers eligible for the savings credit.

5. The projections of the number and proportion of pensioner households eligible for the savings credit are sensitive to modelling assumptions and to projected changes in the distribution of pensioner incomes.

6. The projections of the number of pensioner households eligible for the savings credit are derived from the projected proportions eligible and projections of the number of pensioner households in Great Britain.

7. The reform projections assume: continued earnings uprating of the standard guarantee credit; the savings credit maximum is uprated by earnings from 2008 and then by prices from 2015; earnings uprating of the basic state pension from 2012; measures to improve coverage of the basic state pension described in the White Paper.

8. The projections under the current system assume that basic state pension is uprated in line with prices and the standard guarantee credit with earnings each year. It should be noted that there is a government commitment to uprate the standard guarantee credit with earnings until 2008. Treasury projections for the current system assume price uprating of the standard guarantee credit beyond 2008.

9. Estimates are calibrated to the mid-points of the 2004-05 National Statistics range estimates of non-eligibility to pension credit, which adjust 2004-05 Family Resources Survey data to take account of possible biases in reporting. Although the estimates here are not presented as ranges, they are subject to a margin of uncertainty.

10. The projections are rounded to the nearest 50,000. Totals are rounded separately so components may not sum to totals.