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State Retirement Pensions

Volume 507: debated on Monday 15 March 2010

To ask the Chancellor of the Exchequer if he will make it his policy to increase the state earnings-related pension scheme (SERPS) by 2.5 per cent. in line with the basic state pension; and what recent guidance his Department has issued to those considering a SERPS pension. (321713)

I have been asked to reply.

The conventions on uprating state pensions are concerned with maintaining their price value. Had we applied those rules this year, when inflation as measured by the September retail prices index was minus 1.4 per cent. pensioners would not have received a rise in their state pension.

We decided that the fairest and most effective way of getting help to the 11 million pensioners in the UK was to apply an above earnings increase of 2.5 per cent. to the basic state pension. Because of the statutory link between the additional state pension and public service pensions, any uprating of the additional state pension would impose a burden on taxpayers and also put pensioners with public service pensions at an unfair advantage over those with private sector pensions.

Leaving additional state pension at current rates this year has no bearing on an individual's decision on whether to contract-out of the state second pension because uprating applies only to additional state pension after a person is in receipt of their pension and does not affect the value of the additional state pension being accrued by people below state pension age. Information for individuals considering whether to contract out of the additional state pension into an occupational pension scheme or personal pension can be found in our leaflet entitled ‘Contracted-out pensions’ (PM7).