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Pensions

Mr. Denham: To ask the Secretary of State for Work and Pensions (1) what estimate he has made of the level of basic state pension and state second pension (a) on retirement and (b) at age 75 for a man with annual earnings of (i) £10,000, (ii) £20,000 and (iii) £30,000 over a 40-year working life; and what the projected level of the guarantee part of the pension credit would be, assuming current policies continue; [186436]

(2) what estimate he has made of the state second pension accrual rate that would be necessary for the combined basic state pension and state second pension for a man with annual earnings of (a) £10,000, (b) £20,000 and (c) £30,000 over a 40-year working life to exceed the projected level of the guarantee part of the pension credit (i) on retirement and (ii) at age 75, assuming current policies continue; [186437]

(3) what assessment he has made of the state second pension accrual rate that would be necessary for the combined basic state pension and state second pension for a man with annual earnings of (a) £10,000, (b) £20,000 and (c) £30,000 over a 40-year working life to exceed the projected level of the guarantee part of the pension credit (i) on retirement and (ii) at age 75, assuming that the retirement pension is uprated by the average of earnings and price inflation. [186958]

Malcolm Wicks: The information is provided in the tables.

Table 1 shows the estimated amounts of basic state pension and state second pension that a single male with a 40-year working life, reaching state pension age in 2045 would receive.
Table 1

Annual earnings	Total state pension (£)
£10,000	200
£20,000	220
£30,000	229

Notes:
1. Figures are weekly amounts in 2004–05 price terms and are rounded to the nearest £1. Totals may not sum due to rounding.
2. The weekly level of guarantee credit when this individual reaches state pension age in 2045 is estimated at £236, and at £287 10 years later when the man would be 75. Actual pension credit entitlement depends on both state and private income, savings as well as household circumstances.
3. Currently basic and additional state pension are uprated in line with a minimum of prices and therefore remain constant in real terms.
4. Future policy on calculation and uprating of benefits is for future Parliaments to determine. For the purposes of these projections, it has been assumed that (except where stated) all elements of state pension are uprated in line with prices once in payment and the guarantee credit rises in line with average earnings. Long term assumptions are in line with those for Budget 2004.
5. It is assumed that a man starts paying Class 1 national insurance contributions at age 25 following nine years without any credits and contributes for 40 years.
6. An individual's earnings are assumed to rise in line with average long term earnings' growth and therefore increase in real terms.




 
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Table 2 shows the underlying accrual rate of state second pension required for the basic and state second pension of a man with a 40-year working life
 
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reaching state pension age in 2045 to exceed the level of the guarantee credit, at state pension age and at age 75.
Table 2

		Annual earnings in 2004
		£10,000	£20,000	£30,000
Basic state pension	Contributory pension above guarantee credit	Required underlying rate of accrual in state second pension
Increased in line with prices	At state pension age (percentage)	26.20	22.50	21.20
	At age 75 (percentage)	34.70	29.80	28.10
Increased by average of prices and earnings	At state pension age	Current	Current	Current
	At age 75 (percentage)	26.30	22.60	21.20

Notes:
1. Where the current state second pension accrual rate is sufficient to ensure the combined value of basic state pension and state second pension exceeds the value of the guarantee credit, this has been denoted as "Current".
2. The current underlying rate of accrual is 20 per cent. however state second pension is accrued at different rates for different bands of earnings. The rate shown here is the underlying rate that determines the rate in different bands. For example, the person earning £10,000 per year has an accrual rate in state second pension of 40 per cent., which is twice the underlying rate of 20 per cent.
3. Future policy on calculation and uprating of benefits is for future Parliaments to determine. For the purposes of these projections, it has been assumed that (except where stated) all elements of state pension are uprated in line with prices once in payment and the guarantee credit rises in line with average earnings. Long term assumptions are in line with those for Budget 2004.
4. It is assumed that a man starts paying Class 1 national insurance contributions at age 25 following nine years without any credits and contributes for 40 years.
5. An individual's earnings are assumed to rise in line with average long term earnings' growth and therefore increase in real terms.

Mr. Liddell-Grainger: To ask the Secretary of State for Work and Pensions how many pensioners in Bridgwater (a) have been contacted about converting to direct payment, (b) are still to be contacted about converting to direct payment, (c) have not responded to the contact about converting to direct payment and (d) have chosen to open a Post Office Card Account. [186508]

Mr. Pond: We do not have the information in the format requested. This could be provided only at disproportionate cost.

Key figures on the progress of conversion to Direct Payment are available in the Library updated every four weeks.

Mr. Denham: To ask the Secretary of State for Work and Pensions what assessment he has made of the additional cost of uprating the basic state pension by the average of prices and earnings inflation annually for the next 50 years (a) gross and (b) net of savings in means-tested benefits and direct taxes. [186957]

Malcolm Wicks: The information is provided in the table:
£ billion

	(a) Gross cost	(b) Net cost
2005–06	0.3	0.1
2006–07	0.7	0.4
2007–08	1.0	0.5
2008–09	1.3	0.7
2009–10	1.7	0.9
2020–21	6.3	3.4
2055–56	32.7	17.4

1. Figures are costs for GB and Overseas in 2004–05 price terms, using the GDP deflator index, rounded to the nearest £100 million.
2. For part (a), additional gross basic State Pension costs are estimated by the Government Actuary's Department and are consistent with Budget 2004 assumptions and use 2002 based population projections. Basic State Pension costs refer to the additional costs after allowing for consequential changes to National Insurance Fund benefits and non-means tested vote benefits.
3. For part (b), costs net of income related benefits (savings credit, guarantee credit, housing benefit and council tax benefit) and income tax are calculated using the Department's policy simulation model for 2005–06 and 2006–07. For illustrative purposes it is assumed that the proportion of savings calculated for the 2006–07 year is constant for subsequent years.

TREASURY

EU Productivity

Keith Vaz: To ask the Chancellor of the Exchequer what action has been set by the EU as highest priority for new member states in generating rapid economic reform. [186788]

Ruth Kelly: The new member states have been integrated into the Broad Guidelines of the Economic Policies of the member states and the Community, for the period 2003–05 (BEPGs).

The 2004 BEPG update highlighted country specific economic measures and priorities that each member state should undertake. Under "economic reforms to raise Europe's growth" potential, the Commission also suggested that the existing guidelines aiming at 'more and better jobs' and at 'increasing productivity and business dynamism' be implemented in a comprehensive and co-ordinated way by the new member states. Given the labour market situation is considerably worse in the new member states, the BEPGs recommend that policy efforts concentrate on a small number of priority areas that are likely to have the largest impact on labour market performances: ensuring that real wage developments reflect productivity growth; improving the financial incentives to work by reforming tax/benefit systems; improving skills and training, through the
 
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provisions of lifelong learning facilities; and undertaking appropriate reforms of labour market regulations.

The BEPGs also indicate that R and D diffusion and technology transfers will be as important as R and D investment in accelerating the transition towards higher value-added activities. Sustaining a high level of foreign direct investment is essential, as is an increased responsiveness of the education and training systems to the changing needs of the labour market.

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