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Pensions

Volume 459: debated on Monday 30 April 2007

To ask the Secretary of State for Work and Pensions what estimate he has made of the size of savings needed to buy an annuity for (a) a single worker and (b) a married couple to ensure a pension income that takes them above pension credit eligibility. (135061)

The size of annuity required to take an individual above pension credit eligibility depends on a wide range of factors. This includes the type of annuity an individual purchases, their entitlement to basic and addition state pension, and any additional needs they may have which affect pension credit entitlement. It also depends on whether their pension will take them above pension credit eligibility at the point of retirement or over their expected lifetime and whether their pension will take them above guarantee credit only or savings credit.

Under our proposed pension reforms someone retiring in 2053 with a good contribution record (through working or caring) could expect to receive around £135 per week from the state pension on retirement (in 2005-06 earnings terms). This is—for a single person—above the end point of pension credit. Couples with good contribution records will be substantially above the end point for pension credit.

Only those on the guarantee credit alone will face pound for pound withdrawal on private saving. Someone with around 25 years of working or caring retiring in 2050 will have accrued enough state pension to bring them above the guarantee credit only. Our analysis suggests that in 2050 around 6 per cent. of all pensioners will be eligible for guarantee credit only, and only around one in 50 pensioners will retire directly onto guarantee credit only. In addition, those with small amounts of savings will be able to take them as a lump sum under the trivial commutation rules.