APPENDIX 27
This summary note was prepared by Mr Frank
Field to assist Mr Andrew Young, Deputy Government Actuary, in
costing his proposals for a "New Stakeholder Pension".
NEW STAKEHOLDER PENSION REFORM
1. Objective: A new pension scheme which
lifts people with full contribution records off means tested assistance.
Housing Benefit is to be omitted—assuming it is to be abolished.
2. There is to be a Pension Guarantee made
up of the current National Insurance PAYG state retirement pension
and the new funded scheme. The Guarantee is to be set at a level
such that when people retire they are free of means testing.
At what level of average earnings on retirement would the guarantee
have to be set to do this?
3. There will be a vesting day on which
a particular cohort are brought into the scheme. The scheme is
compulsory. At what age between 20 and 25 should that cohort
be?
4. What periods of individuals not paying
contributions could the scheme sustain for the different starting
ages? Does the Government Actuary advise such a plan?
5. Older workers could buy themselves into
partial entitlement. The Guarantee would not apply to them.
6. The New Stakeholder Pension is a single
product. This single product will be administered by approved
suppliers. As everyone is in there is no need for advisory costs.
Advice is only required for any additional pension coverage someone
may wish to make.
7. The Government and the Government Actuary
will determine contribution rates and the investment strategy.
8. Life cover is compulsory.
9. Certain groups will have their contributions
paid for them. These will be parents with care for at least one
child under 5 years of age, people with full-time care responsibilities
for a relative. These contributions will be paid for by graduated
contributions from higher earners. What would be the Government
Actuary's suggested range of graduated contributions to meet this
objective?
10. At what age should the pension be
paid?
11. Does the Government Actuary advise
on a new income basis other than just accepting National Insurance
with present ceilings?
12. At what level should people on low
earnings come into the full pension contribution and entitlement?
December 1999
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