(2) pursuant to his answer of 18 December 2006, Official Report, column 1578W, at what percentage of average earnings he expects to restore the earnings link to the basic state pension;
(3) how much the basic state pension is expressed as a percentage of national average earnings.
The following table sets out the value of the basic state pension as a percentage of national average earnings in the years requested.
Value of basic state pension as a percentage earnings of national average 1981 23.7 1991 18.3 1997 17.0 2006 15.7 2012 14.2 Notes: 1. The Average Earnings figure is for full-time employees in the April of that year and has been taken from the New Earnings Survey prior to 1998 and from Annual Survey of Hours and Earnings since 1998. 2. 2012 figures are consistent with assumptions underlying pre-Budget report 2006. Source: ONS
Our objective is to restore the earnings link to the basic State Pension, subject to affordability and the fiscal position, in 2012 but in any event at the latest by the end of the next parliament.
At the time the earnings link is restored, the proportion the basic State Pension represents in terms of earnings will remain constant and it will continue to hold its value over time, relative to earnings.
However, it is important not to focus on the figure that the basic State Pension represents as a percentage of average earnings in isolation.
As a result of the measures we have introduced since 1997 pensioner incomes have risen by about 25 per cent. compared to 15 per cent. for earnings. These measures have made pensioners on average £17 a week better off and the poorest third of pensioners around £30 a week better off (in 2006-07 prices) than if an earnings link had been applied to the basic State Pension from 1997.
Earnings uprating of the basic State Pension is only one part of the complete reform package. It should be considered alongside the reforms to the State Second Pension and the introduction of personal accounts for which the restoration of the earnings link provides a firm underpin.
For instance, a median earner who works from age 25 to state pension age could expect a gross income (including from a Personal Account) of just under £220 per week1 (in 2005-06 earnings term) in 2053 under the reformed system. This equates to 43 per cent. of average earnings2 (also in 2005-06 earnings terms).
1 The gross retirement income figure comes from DWP modelling, assuming weekly earnings of £440 (in 2005-06 earnings terms) for a median male earner.
2 The Average Earnings figure is for all full-time employees, taken from the 2005 Annual Survey of Hours and Earnings and is equal to £516.40.