Skip to main content

Pensions

Volume 455: debated on Monday 8 January 2007

To ask the Secretary of State for Work and Pensions what assessment his Department has carried out of the impact on work incentives of (a) reducing the number of qualifying years needed to receive a full basic state pension and (b) gradually reducing the link between salary and state second pension accruals. (102185)

I refer the hon. Member to the reply given on 8 November 2006, Official Report, columns 1639-40W.

To ask the Secretary of State for Work and Pensions if he will estimate how many pensioner benefit units in 2050 will face a (a) 100 per cent. marginal rate of pension credit withdrawal if the White Paper reforms are implemented and (b) a 40 per cent. marginal withdrawal rate if they are not. (102223)

The information requested is in the following table. The package of reforms in the White Paper “Security in Retirement: Towards a New Pension System” is designed to:

promote personal responsibility: tackling the problem of undersaving for retirement;

be fair: protecting the poorest, and being fair to women and carers, to savers, and between generations;

be simple: clarifying the respective roles of the State, the employer and the individual;

be affordable: maintaining macro-economic stability and striking the right balance for provision between the State, the employer and the individual; and

be sustainable: setting the basis of an enduring national consensus, while being flexible to future trends.

The reforms to state pensions will provide a solid foundation for private saving, both by limiting the spread of pension credit entitlement and by delivering a simpler and more predictable state pension outcome. Under the proposed reforms, even with the standard guarantee credit linked to earnings to protect the poorest, only 6 per cent. of pensioner households will be eligible to guarantee credit only, with 94 per cent. of pensioner household above the level where private saving income is taken into account pound for pound in pension credit. Furthermore, those with private savings of less than £15,000 could take them as a lump sum under the trivial commutation rules.

The total number of pensioner households under the White Paper reforms is lower than the total number under the current system because of the phased increase in the state pension age starting in 2024.

It cannot be assumed that all those with 100 per cent. marginal deduction rates are in receipt of the guarantee credit only. People on both guarantee credit and savings credit who qualify for additional amounts and are on the savings credit maximum will also have 100 per cent. marginal deduction rates.

Numbers and proportions of pensioner benefit units in 2050 that will face: (a) a 100 per cent. marginal rate of pension credit withdrawal if the White Paper reforms are implemented and (b) a 40 per cent. marginal withdrawal rate if they are not.

Without reform 40 per cent. marginal deduction rates?current system standard guarantee credit uprated by earnings

White Paper reforms 100 per cent. marginal deduction rates?White Paper reforms

Number of pensioner households in 2050

7,950,000

650,000

Proportion of pensioner households in 2050 (%)

69

6

Notes:

1. Estimates of the number of pensioner households eligible for pension credit are the mid-points of projections taken from two separate micro-simulation models. Modelling of the reform proposals does not include any increase in private saving from the introduction of personal accounts, which would reduce the numbers eligible for pension credit.

2. Care should be taken when interpreting these projections as they are subject to a margin of uncertainty. The projections are based on long run simulations of the incomes of individuals under a set of assumptions including life expectancy, partnership formation, earnings growth, employment rates, state and private pension accumulation.

3. Projections of the number of pensioner households eligible for pension credit are derived from the projected proportions eligible and projections of the number of pensioner households in Great Britain.

4. Estimates cover all those aged above women’s state pension age in the private household population of Great Britain.

5. Estimates account for equalisation of state pension age between 2010 and 2020. They also account for the proposed further increases in state pension age described in the White Paper. The estimates assume that the minimum age at which people can claim pension credit rises in line with women’s state pension age.

6. Projections under the White Paper proposals assume: continued earnings uprooting 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; and measures to improve coverage of state pensions described in the White Paper. Figures exclude the effect of Personal Accounts.

7. Projections under the current system with guarantee credit earnings uprated assume: continued earnings uprating of the standard minimum guarantee; continued price uprating of the savings credit threshold and the basic state pension.

Source:

DWP microsimulation modelling

To ask the Secretary of State for Work and Pensions (1) in which overseas countries resident UK pensioners receive annual uprating of state pensions and other benefits; (104591)

(2) in which countries the (a) basic state pension and (b) other benefits of UK pensioners are not uprated annually; and how many UK pensioners are affected in each country.

Annual upratings of the state pension, which is generally the only benefit paid to pensioners abroad, are paid under:

(a) the EC’s Social Security Regulations, which apply to pensioners who have a UK state pension living in the European economic area and Switzerland; and

(b) reciprocal social security agreements with other countries, which allow for increases to be paid there.

The countries with which the UK has reciprocal agreements which allow state pension upratings to be paid are: Barbados, Bermuda, the Channel Islands, Cyprus, Israel, Jamaica, Malta, Mauritius, the Philippines, Turkey, the USA and the now separate republics of the former Yugoslavia the state union of Serbia and Montenegro, Bosnia-Herzegovina, Croatia, Slovenia and the former Yugoslav Republic of Macedonia). State pensions are not uprated in any other country.

The information about the frozen rate countries and the number of pensioners in those countries has been placed in the Library.

To ask the Secretary of State for Work and Pensions how many (a) Canadian and (b) Australian pensioners residing in the UK are in receipt of (i) pension credit and (ii) other means-tested benefits; and what the total annual cost is of these benefits to each category of pensioner. (104711)

The information is not available as nationality data is not collected by the Department’s administration systems.

To ask the Secretary of State for Work and Pensions what the Government’s position is on the possible recovery of costs from pension scheme members seeking judicial review of the Government’s policy in respect of lost occupational pension rights; and if he will make a statement. (104733)

As is normal practice in these matters, we will consider the issue of recovering our legal costs at the end of the proceedings.

To ask the Secretary of State for Work and Pensions what negotiations he has entered into with employee and employer organisations concerning Section 67 of the Pensions Act 1995; and what plans he has to allow employers and trustees of pension funds to negotiate downwards what they pay existing pensioners. (108266)

None.

I refer the hon. Member to the written answer I gave the hon. Member for Bury, North (Mr. Chaytor) on 4 December 2006, Official Report, column 161W.

To ask the Secretary of State for Work and Pensions what measures he is taking to encourage (a) employers with existing occupational pension schemes to maintain them and (b) those without such schemes to introduce them. (108615)

We value the important role that employers with occupational pension schemes play in encouraging individuals to save for their retirement. That is why the White Paper “Security in retirement: towards a new pensions system” announced a rolling deregulatory review of private pensions regulation to investigate further ways to lighten the regulatory burden on business, with a view to encouraging and strengthening existing provision.

We also said that we would remove some of the administrative complexity by abolishing contracting out for defined contribution schemes, and by allowing occupational pension schemes to convert guaranteed minimum pension rights into scheme benefits by offering the actuarial equivalent in exchange. Measures to achieve this are contained in the Pensions Bill recently introduced in Parliament.

We are determined that alongside the introduction of personal accounts, employers should be supported in continuing to provide occupational pension schemes. We will help by making the exemption process for high quality schemes as simple and straightforward as possible.

The Government have also lightened the regulatory burden imposed by the tax rules on schemes, and employers providing them, by bringing in key legislation in the Finance Act 2004 to replace the complex pension tax rules with one simplified regime from April 2006. Employers providing registered pension schemes for their employees continue to receive full tax relief on the value of contributions they make to those schemes.