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Personal Accounts

Volume 488: debated on Monday 2 March 2009

To ask the Secretary of State for Work and Pensions what the income distribution of those who will be automatically enrolled into a personal account under the Pensions Bill 2007 is. (249449)

The Pensions Act 2008 requires employers to automatically enrol eligible workers into a qualifying work-based pension arrangement. Employers will choose the qualifying scheme they use, which could be the new personal accounts scheme.

The information in the table summarises the income distribution for those aged 22 to state pension age, working in the private sector, not already saving into a work-based pension scheme and earning more than £5,035 using data from the 2007 annual survey of hours and earnings.

Income distribution of those eligible for automatic enrolment into a work-based pension scheme

Salary band

Percentage

Average income

£5,000-£9,999

19

£10,000-£14,999

22

£15,000-£19,999

21

£20,000-£24,999

14

£25,000-£29,999

9

£30,000-£34,999

5

£35,000-£39,999

3

£40,000-£44,999

2

£45,000+

4

Median (£)

17,000

Mean (£)

21,000

Note:

All those aged 22 to state pension age who work in the private sector, are not already saving into a work-based pension scheme and earn more than £5,035. Totals may not sum due to rounding.

Source:

Annual survey of hours and earnings—2007.

To ask the Secretary of State for Work and Pensions if he will estimate to the nearest whole pound the weekly pension income from a personal accounts pension for a single person auto-enrolling into a personal account in 2012 at the age of (a) 22, (b) 32, (c) 42 and (d) 52, earning a salary of (i) £11,500, (ii) £12,500, (iii) £13,500, (iv) £14,500, (v) £15,500, (vi) £16,500, (vii) £17,500, (viii) £18,500, (ix) £19,500, (x) £20,500, (xi) £21,500 and (xii) £22,500 which rises annually during their career each year in line with earnings, where that person stopped working at 68, annuitised at 68, and had no savings other than a personal account pension pot. (249450)

The following table shows the expected gross weekly private pension and total net weekly income for a male in the age and earnings groups requested.

Retirement income for an individual who starts saving in 2012

£

Age in 2012

22

32

Salary in 2012

Gross private pension income

Net total income

Gross private pension income

Net total income

£11,500

24

186

17

181

£12,500

28

189

20

183

£13,500

31

191

23

185

£14,500

35

195

26

188

£15,500

39

198

29

190

£16,500

43

201

32

193

£17,500

47

204

35

196

£18,500

51

207

37

198

£19,500

55

210

40

201

£20,500

59

213

43

203

£21,500

63

216

46

206

£22,500

66

219

49

208

£

Age in 2012

42

52

Salary in 2012

Gross private pension income

Net total income

Gross private pension income

Net total income

£11,500

12

169

7

164

£12,500

14

172

8

165

£13,500

16

174

9

167

£14,500

18

177

10

168

£15,500

20

180

11

170

£16,500

22

182

12

172

£17,500

24

185

14

175

£18,500

25

187

15

178

£19,500

27

190

16

181

£20,500

29

192

17

183

£21,500

31

195

18

185

£22,500

33

197

19

188

Note:

These examples assume an annual management charge of 0.5 per cent., standard assumptions about factors such as investment growth and a lifestyled fund and phasing of contributions over a three year period. The whole of the pension pot is annuitised using RPI linked annuities, assuming the annuitant is male. Individuals are assumed to start working at the age of 22, with a state pension age of 68 and to contribute 5 per cent. (including tax relief) of their qualifying earnings and to receive 3 per cent. of their qualifying earnings from their employer. Net total income is total retirement income after tax for private pension income, basic state pension, second state pension and income related benefits. Figures are in 2008-09 earnings terms