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Volume 462: debated on Thursday 28 June 2007

To ask the Secretary of State for Work and Pensions what steps he expects to be able to take between the publication of the initial report in the summer of 2007 on pension scheme assets held by schemes in wind-up with a deficiency of assets to protect those scheme assets and the publication of the final report. (143543)

The prospective assistance provided by the Financial Assistance scheme and the current work of the review into the use of relevant scheme assets should not affect the decisions that trustees take in relation to their scheme funds.

It is not for the Government to offer advice to trustees on whether and when they should purchase annuities. Trustees must act in the best interest of their members and in accordance with scheme rules and their statutory obligations.

To ask the Secretary of State for Work and Pensions what survey work has been carried out to establish the retirement income replacement rate which individuals are prepared to fund by contributions from current salary in the UK. (144216)

No survey work provides information in exactly this form.

The Pensions Commission estimated median desired replacement rates using information on individuals’ current income and on the income individuals considered enough to live on in retirement. In addition the Commission also looked at actual replacement rates and levels of expenditure. Considering the evidence together they concluded that there could be no universal definition of pension adequacy, but used benchmark replacement rates of 80 per cent. of gross earnings for lowest earners, declining to 67 per cent. for median earners and to 50 per cent. for top earners to assess pension adequacy. (See Table 1)1.

1 Pensions Commission (2004), Pensions Challenges and Choice: The First Report of the Pensions Commission, Chapter four.

Table 1. Adequacy thresholds


Target replacement rate (Gross) (Percentage)

Less than £9,500




£17, 500-£24, 999




£40,000 plus



The first report of the Pensions Commission: Pensions, Challenges and Choices, Appendices, p. 169

Both the Pensions Commission and DWP have estimated the number of people who are saving enough to reach these benchmarks utilising evidence from more than one survey. DWP current estimates indicate that around seven million people are undersaving2.

2 DWP (May 2006), Security in Retirement: towards a new pensions system, Appendix A.