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Pensions

Volume 684: debated on Tuesday 25 July 2006

asked Her Majesty’s Government:

What number and percentage of men and women would qualify for the full basic state pension if the number of qualifying years were reduced to (a) 25 years and (b) 20 years in (i) 2010; (ii) 2020; and (iii) 2030; and what would be the gross and net cost of each proposal. [HL 6694]

The White Paper, Security in Retirement: Towards a new pensions system, set out a package of reforms aimed at increasing the number of people entitled to a state pension and the amount to which they would be entitled.

A key element in the package is to reduce the number of qualifying years for a full basic state pension to 30 for both men and women (from 44 for men and 39 for women now) reaching state pension age from 2010.

The reduction in qualifying years to 30 will mean around 125,000, or around 70 per cent of women reaching state pension age in 2010 are expected to achieve full entitlement—compared to around 50 per cent in 2010 without reform (Government Actuary Department’s retirement pension model). The majority of those remaining are expected to achieve between about 61 to 99 per cent of a full basic state pension, with others getting up to 60 per cent full entitlement based on their own records, whereas without reform they may have got nothing. The information requested is in the tables below. The estimates are approximate and reflect the inevitable uncertainty associated with any future projection.

Table 1: Number and percentage of men and women who are estimated to qualify for full basic state pension if the number of qualifying years required for full basic state pension were reduced to 25 and costs

Men of pensionable age

Women of pensionable age

Men reaching state pension age

Women reaching state pension age

Gross £m

Net £m

2010

3,900,000 (85 per cent to 90 per cent)

3,600,000 (around 50 per cent)

305,000 (over 95 per cent)

140,000 (around 80 per cent)

50

40

2020

5,200,000 (90 per cent to 95 per cent)

4,300,000 (around 65 per cent)

310,000 (over 95 per cent)

320,000 (around 90 per cent)

670

520

2030

6,400,000 (around 95 per cent)

6,800,000 (around 85 per cent)

385,000 (around 95 per cent)

405,000 (around 95 per cent)

1,590

1,,240

Table 2: Number and percentage of men and women who are estimated to qualify for full basic state pension if the number of qualifying years required for full basic state pension were reduced to 20 and costs

Men of pensionable age

Women of pensionable age

Men reaching state pension age

Women reaching state pension age

Gross £m

Net £m

2010

3,900,000 (85 per cent to 90 per cent)

3,600,000 (around 50 per cent)

310,000 (over 95 per cent)

150,000 (around 85 per cent)

60

50

2020

5,200,000 (90 per cent to 95 per cent)

4,400,000 (around 65 per cent)

315,000 (over 95 per cent)

325,000 (around 95 per cent)

760

590

2030

6,500,000 (around 95 per cent)

6,900,000 (around 85 per cent)

390,000 (around 95 per cent)

410,000 (around 95 per cent)

1,760

1,370

Notes to Tables 1 and 2:

1. Source: Estimates from the Government Actuary's Department's retirement pension model

2. Estimates are based on reducing qualifying years required for full basic state pension to 25 in table 1 and 20 in table 2, for people reaching state pension age from 2010.

3. Numbers of people of pensionable age are rounded to the nearest 100,000.

4. Numbers of people reaching pension age are rounded to the nearest 5,000.

5. The number of women reaching state pension age in 2010 takes into account state pension age equalisation, which means that only half of the women who are projected to reach age 60 in 2010 actually reach state pension age in 2010.

6. Costs are presented in 2006 prices and rounded to the nearest £10 million.

7. Costs are expressed as additional expenditure over and above expenditure on the current system without any reform.

8. No other policy changes have been modelled in producing these estimates other than the reduction in qualifying years to 25 in table 1 and 20 years in table 2.

9. Net costs are net of income related benefits. They have been estimated by DWP using offsets generated by the policy simulation model.

10. Estimates are for Great Britain only.