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Volume 490: debated on Monday 30 March 2009


Monday 30 March 2009


Work and Pensions

State Pension

The Petition of the Retired Members Committee of the South East Region branch of Unison, pensioners, and others,

Declares that the 2008 basic state pension was set at £90.70 per week, while the official poverty level was set at £134 per week; further declares that if the state pension link to average earnings had not been broken by Margaret Thatcher’s Government, the state pension would stand at £139 per week; notes that pensioners receive only a 25 pence per week increase in their pension when they reach the age of eighty; further notes that the National Insurance Fund has a surplus of £38.5billion; believes that these statistics speak for themselves.

The Petitioners therefore request that the House of Commons urges the Government to raise the state pension immediately to £139 and to restore the link to average earnings for future increases.

And the Petitioners remain, etc.—[Presented by Kelvin Hopkins, Official Report, 2 March 2009; Vol. 488, c. 700 .]


Observations from the Secretary of State for Work and Pensions:

Our strategy, since 1997, has been to target help on the poorest pensioners while providing a solid foundation of support for all. This Government will be spending around £90 billion on pensioners in 2008-09. This is over £13 billion more than if the system we inherited in 1997 had continued, and around half of this additional spending is going to the poorest third of pensioners. Through this approach we have lifted 900,000 pensioners out of relative low income since 1998-99 (measured as below 60 per cent of contemporary median income after housing costs.)

The basic State Pension provides a strong foundation towards retirement income, but no pensioner needs to live on the basic State Pension alone. Pension Credit is available to help those pensioners with lower incomes. Pension Credit ensures that no-one aged 60 or over needs to live on less than £124.05 a week or £189.35 a week for couples. From April 2009, this will increase to £130.00 a week or £198.45 a week for couples. Those who are receiving Pension Credit are also eligible for help with rent and Council Tax costs.

From April 2009, the basic State Pension will be increased by five per cent: in line with the highest increase in inflation last year. At a time of falling inflation, this is the largest increase in basic State Pension since 2001.

Increasing the basic State Pension to £139 a week would incur an additional cost of around £25 billion each year in the early years. That would be the equivalent of an extra 5 pence on income tax. Increasing basic State Pension in this way would not effectively target resources on the poorest pensioners; whereas wealthier pensioners would gain considerably. We estimate that richer pensioners with a full basic State Pension would gain around £50 a week of basic State Pension if it rose to £139 a week, compared to a maximum gain of around £15 a week for the poorest pensioners receiving the Pension Credit standard minimum guarantee only.

In the Pensions Act 2007 we made a commitment to re-link the uprating of the basic State Pension to average earnings, during the next Parliament. Our objective, subject to affordability and the fiscal position, is to do this in 2012, but in any event by the end of the next Parliament at the latest. We will make a statement on the precise date at the beginning of the next Parliament. The restoration of the earnings link is part of an integrated package of reforms, which are designed to meet the needs of those in retirement and future generations.

An introduction in 2012 provides a firm underpin for the introduction of personal accounts in the same year. Earnings uprating of the basic State Pension must also go hand in hand with rises in State Pension age and the full package of pension reforms. This will prevent an unaffordable increase in State Pension expenditure.

In addition to basic State Pension and Pension Credit we have made a number of other important improvements in provision for retired people since 1997. These include: free eye tests and prescriptions, free off-peak bus travel, now available country-wide, and the free television licence scheme for those aged 75 and over. The Winter Fuel Payment provides a significant contribution towards winter fuel bills. For 2008-09, we paid an extra £50 to qualifying households with someone aged 60 to 79, and an additional £100 to those with someone aged 80 or over. This makes combined payments of up to £250 and £400 respectively for winter 2008-09. We also paid a one-off boost to the Christmas Bonus for winter 2008-09: making it £70 in total instead of the usual £10.