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State Retirement Pensions: Uprating

Volume 491: debated on Monday 20 April 2009

To ask the Secretary of State for Work and Pensions what estimate his Department has made of the additional annual cost to the public purse of uprating the basic state pension in line with earnings from 2010-11. (246723)

The gross additional basic state pension spend due to increasing the basic state pension by earnings from 2010 and the 2007 Pensions Act reforms are given in the following table:

Gross additional basic state pension spend due to pension reform and restoring uprating the basic state pension by earnings from 2010-11, 2008-09 prices.

£ billion

2010-11

0.1

2011-12

0.5

2012-13

0.5

2013-14

1.6

2014-15

2.6

2015-16

3.6

2020-21

9.2

2030-31

24.9

2040-41

48.7

2050-51

70.0

Notes:

1. Baseline published projections of expenditure on pensioner benefits assume that the basic state pension is increased by earnings from 2012.

2. Estimates given show the gross additional basic state pension spend due to increasing the basic state pension by earnings from 2010 and implementing the 2007 Pensions Act reforms from April 2010. During the next Parliament, we will re-link the uprating of the basic state pension to average earnings. 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.

3. Estimates do not reflect the estimated savings from reduced income related benefit payments (pension credit, housing benefit and council tax benefit).

4. In the financial years up to and including 2013-14 Treasury Economic assumptions consistent with PBR 2008 have been used to model earnings uprating. After this point a long term earnings growth assumption of 4.93 per cent. has been applied.

5. Estimates are in 2008-09 prices, have been rounded to the nearest £100 million and include UK and overseas claimants.

Source:

DWP modelling.