asked Her Majesty's Government:
What would be the likely size of the final pot in today's terms, including tax relief, with prudent assumptions about investment growth, for a man on median male earnings if he and his employer over 40 years were each to contribute (a) 4 per cent; (b) 5 per cent; (c) 6 per cent; (d) 7 per cent; and (e) 8 per cent into (i) a contracted-in money purchase scheme, and (ii) a contracted-out money purchase scheme; and [HL673]
What would be the likely size of the final pot in today's terms, including tax relief, with prudent assumptions about investment growth, for a woman on median female earnings if she and her employer over 40 years were each to contribute (a) 4 per cent; (b) 5 per cent; (c) 6 per cent; (d) 7 per cent; and (e) 8 per cent into (i) a contracted-in money purchase scheme, and (ii) a contracted-out money purchase scheme. [HL674]
The information is in the tables.
Type of Money Purchase Scheme Value of final pensions pot after 40 years 8 per cent 10 per cent 12 per cent 14 per cent 16 per cent Contracted-in £239,645 £299,556 £359,467 £419,378 £479,290 Contracted-out £374,151 £434,062 £493,973 £553,885 £613,796
Type of Money Purchase Scheme Value of Final Pensions Pot after 40 Years 8 per cent 10 per cent 12 per cent 14 per cent 16 per cent Contracted-in £186,700 £233,375 £280,050 £326,725 £373,400 Contracted-out £302,309 £348,984 £395,659 £442,334 £489,009 All figures are in 2006-07 prices. Total contributions are split equally between employee and employer. Contributions are assumed to begin in 2006-07 for an individual aged 25, and last 40 years until retirement. Assumes a real investment return of 3.5 per cent a year for 40 years. The difference in figures in the two tables is down to the difference in median earnings between men and women. Figures are for men and women on median male and female earnings respectively in 2006-07. The figures do not include tax relief as this is delivered through the pay packet as opposed to being paid into the scheme. The size of the pension pots between contracted-in and contracted-out individuals is not strictly comparable. This is because contracted-out individuals on median earnings will also build up some to S2P. So their S2P should be taken into account along with their private pension when comparing to contracted-out individuals. The figures assume the existing system for contracting out will continue and make no allowance for the proposals in the current Pensions Bill.