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Pensioner Poverty

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions if he will estimate (a) how many pensioners were living in deep poverty, defined as a household income below 40 per cent. of median household earnings and (b) how many such pensioners
18 Jun 2007 : Column 1540W
were not claiming the full pension credit or minimum income guarantee they were entitled to in each year since 1997-98. [113565]

James Purnell [pursuant to the reply, 29 March 2007, Official Report, c. 1721-24W]: The most common and internationally recognised threshold to measure poverty is income below 60 per cent. of median. We do not present information covering 40 per cent. of median income in our Households Below Average Income series as it is not a good measure of poverty. This is because households stating the lowest incomes to the Family Resources Survey (FRS) may not actually have the lowest living standards. Many people who report very low incomes appear to have high spending. Hence any statistics on numbers in this group may be misleading.

Specific information regarding low income for the United Kingdom is available in “Households Below Average Income 1994-95 to 2005-06” (HBAI). This annual report, which is a National Statistics publication, includes the numbers and proportions of individuals, children, working age adults and pensioners with incomes below 50 per cent., 60 per cent. and 70 per cent. of median income, and the proportions in persistent poverty.

Pension credit has been highly successful in reducing pensioner poverty; since its introduction, the number of pensioners in relative poverty has fallen by over 700,000. Now, for the first time in a period of sustained economic growth, pensioners are less likely to be in poverty than the population as a whole, after housing costs are accounted for.

We continue to make every effort to ensure that pension credit goes to those who are entitled to it. It is more challenging to reach those entitled to smaller amounts, or to the savings credit only, who may be less familiar with the entitlements available to them. The Pension Service has contacted pensioners to encourage them to take up entitlement to pension credit many times already as part of extensive marketing activity. Over 70 per cent. of those pensioners who appear to have entitlement to pension credit have been contacted over five times already. And around 25 per cent. of customers visited about pension credit say that they do not want to make a claim.

However, we are committed to improving take-up and are continually looking at further ways to target these groups and encouraging them to apply.

The information requested for pensioners in Great Britain is shown in the following tables. Estimates of entitled non-recipients of MIG or pension credit should be treated with caution. This is especially the case given that we are looking at the extreme of the income distribution and so are less sure of pensioners’ modelled entitlement. Results are based on small sample sizes and have not been corrected for biases that may be inherent in estimates of entitlement to income related benefits—that is, they may be based on the data for those who appear to be entitled non-recipients but will not all actually be entitled non recipients and vice versa. Figures are therefore presented as proportions of the total pensioner population below the 40 per cent. of median household income.


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Table 1 : Number of pensioners living in households with less than 40 per cent. of contemporary median household income, and as a proportion of all pensioners, for the years 1997-98 to 2005-06, Great Britain
After housing costs (million) As a proportion of all pensioners (percentage)

1997-98

0.47

5

1998-99

0.49

5

1999-2000

0.49

5

2000-01

0.46

5

2001-02

0.51

5

2002-03

0.47

5

2003-04

0.51

5

2004-05

0.45

4

2005-06

0.46

4

Notes:
1. Figures are presented after housing costs as this is our preferred measure for pensioners.
2. The table shows number of individuals in millions, rounded to the nearest 10 thousand.
3. These figures are not National Statistics and caution must be applied because those people stating the lowest incomes in the FRS may not actually have the lowest living standards.
4. Estimates cover the private household population of Great Britain. The data source is the Family Resources Survey.
5. These figures are calculated using OECD equivalisation factors. Prior to 2002-03 they are based on a GB median and from 2002-03 it is based on a UK median. This is consistent with low income estimates published in the latest edition of Households Below Average Income. The GB median is similar to the UK median.


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Table 2: Proportion of pensioners living in households with income below 40 per cent. of contemporary median household income who were also living in a benefit unit that is entitled but not receiving IS/MIG/PC, Great Britain
Percentage
After housing costs As a proportion of all pensioners

1997-98

36

2

1998-99

35

2

1999-2000

42

2

2000-01

45

2

2001-02

57

3

2002-03

55

3

2003-04

50

2

2004-05

64

3

2005-06

60

3

Notes:
1. Figures are presented after housing costs as this is our preferred measure for pensioners.
2. Estimates of the pensioner population cover those above state pension age (60 for women and 65 for men). The estimates therefore exclude some men aged 60 to 64 and partners of pensioners aged under 60, who may have been eligible but not claiming pension credit.
3. Estimates also exclude those cases where respondents have reported they are awaiting the outcome of a claim for a benefit and have been modelled as entitled to that benefit.
4. Estimates cover the private household population of Great Britain. The data source is the Family Resources Survey.
5. These figures are calculated using OECD equivalisation factors. Prior to 2002-03 they are based on a GB median and from 2002-03 it is based on a UK median. This is consistent with low income estimates published in the latest edition of Households Below Average Income. The GB median is similar to the UK median.
6. Minimum income guarantee (MIG) was introduced for pensioners in April 1999 paid through income support.
7. Pension credit (PC) was introduced mid-way through 2003-04; therefore, estimates for 2003-04 cover those pensioners who were entitled but not receiving either MIG or PC. As this relates to the first six months of pension credit the figures should be treated with some caution.
8. For the purposes of this analysis, benefit unit based data (take-up statistics) were combined with household equivalised income based results (Households Below Average Income statistics).
9. Estimates for 2000-01 and 2003-04 onwards incorporate the results of a data matching exercise, which links the Family Resources Survey with DWP administrative data in order to identify ‘hidden recipients’ of MIG-PC, i.e. those people who tell the FRS they do not receive pension credit, but actually do.
10. Estimates are presented as proportions of the total pensioner population below the 40 per cent. of median household income, as the analysis is based on single-year survey data and the absolute numbers of such pensioners who were not claiming the pension credit or minimum income guarantee they were entitled to might be biased due to small sample sizes.
11. These analyses have not been corrected for the biases that may be inherent in estimates of entitlement to income-related benefits—that is, they may be based on the data for those who appear to be entitled non recipients (ENRs) but will not all actually be ENRs and vice versa—and so they should be treated with some caution.
12.The estimates relate only to those who were modelled as entitled to receive benefit but were not identified to be in receipt of any amount of benefit. It therefore does not include cases where a pensioner is in receipt of some benefit, but this is less than the amount they are truly entitled to. Including these cases may not give a reliable indication of full take-up due to the potential error that exists in modelling entitlement.

Pensions

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions how many defined benefit schemes reduced the cap on indexation of pensions in payment from 5 per cent. to 2.5 per cent. for accruals from April 2005; and how many active members there are in aggregate in these schemes. [141526]

James Purnell: The information is not currently available. Information on the indexation of pensions in payment after April 2005 was requested in the Office for National Statistics’ 2006 Survey of Occupational Pension Schemes, work on which is continuing.

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions if he will break down the figures in table 7.12 of the Family Resources survey to show the proportion of working age private sector employees with pension provision in 2005-06; and what the comparable figures were for each year since 1996-97. [141537]

James Purnell: This information is not available.


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The Family Resources Survey does not collect information about employment sector. Employees are asked to identify the main activity at the place where they work but these broad industry classifications are not robust enough to provide an accurate breakdown of public and private sector employment.

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions (1) what proportion of (a) schemes and (b) members included in the sample of defined benefit schemes analysed in the Purple Book were in the public sector; [141541]

(2) if he will publish the figures which form the basis of chart 3.11 of the Purple Book indicating how many defined benefit schemes in the sample closed in each year since 1995. [141570]

James Purnell: This is not a matter for the Secretary of State.


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The Purple Book was a joint study by the Pensions Regulator and the Pension Protection Fund (PPF). The statistics were generated through analysis of information collected by the Pensions Regulator from pension scheme returns. Some of this information was further processed by the PPF in collaboration with the Government Actuaries’ Department so that valuation information was as at a common date.

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions if he will place in the Library the figures illustrated by the graph in figure 8 of Security in retirement: towards a new pension system. [141548]

James Purnell: The following table gives the updated numbers from Figure 8 of Security in retirement: towards a new pensions system. Since the White Paper these numbers have been updated to 2007-08 earnings terms and include state second pension simplification policy.

Income for a median earner retiring in 2050-53 (current system/reform)
(£)
Basic state pension State second pension Pension credit Private pension Total

Reform with saving

81

71

0

86

237

without saving

81

71

0

0

151

Current with saving

36

73

38

37

184

without saving

36

73

53

0

162

Notes: In 2007-08 earnings terms, income shown before tax. Assumes a median earner works from age 25 to SPA, retiring in 2050 at age 65 under the current system and at age 68 in 2053 under reform. Under the current system it is assumed that saving is five per cent of salary between the Primary Threshold and the UEL into a stakeholder pension, with a 1.5 per cent. annual management charge. This is equivalent to employee-only contribution rate into the new personal accounts. After reform it is assumed that saving is 8 per cent. of salary between the primary threshold and the UEL into a personal account (which includes 3 per cent contribution, and has 0.5 per cent. annual management charge). Amounts may not sum due to rounding. Source: DWP modelling

Pensions: Rebates

Mr. Laws: To ask the Secretary of State for Work and Pensions (1) what plans he has to review the level of contracted out rebates for pension schemes from 1 April 2008; and if he will make a statement; [141089]

(2) what plans he has to revise the level of contracted-out national insurance rebates for (a) April 2008 and (b) April 2012; and if he will make a statement; [141172]

(3) what plans he has to review the levels of the contracted-out rebates for pensions; what plans the Government has to make further changes from April 2008; and if he will make a statement. [141181]

James Purnell: There is a legal requirement to review the level of contracted-out rebate rates at least every five years—the next review is due to set rates from 2012 to 2017. However, the Secretary of State can, if he considers it necessary or appropriate, review rebate rates more frequently.

The Government have considered the timing of the next review, taking account of both the current fiscal circumstances and of the pension reforms being introduced in the Pensions Bill. As a result, we do not believe it is necessary to review the rebate rates in the short term. However we will continue to monitor the impact on contracting out of the various pensions reforms, in particular the decision to abolish contracting out for defined contribution schemes. These factors will be taken into account when considering the timing of future reviews.

Personal Savings

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions what assumption has been made on the annual uprating of the contribution limit for personal accounts in the stochastic modelling described on pages 113 and 114 of the Regulatory Impact Assessment to Personal Accounts: A New Way to Save. [141528]

James Purnell: To estimate the impact of the personal accounts contribution limit on individuals' pension income it was assumed that the limit would be uprated in line with average earnings.

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions to what year the figures in table 5.2 of the Regulatory Impact Assessment to Personal Accounts: A New Way to Save pertain. [141533]


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James Purnell: The figures in table 5.2 refer to the financial year 2003-04. It was erroneously labelled as being data from 2005-06. The correct title of the table should be "Personal and stakeholder pensions: average contribution by status and earned income in 2003-04. The full table and notes can be found at

Mr. Philip Hammond: To ask the Secretary of State for Work and Pensions whether the average contributions to personal and stakeholder pensions detailed in table 5.2 of the Regulatory Impact Assessment to Personal Accounts: A New Way to Save include contracted-out rebates. [141534]

James Purnell: Table 5.2 is replicated from HMRC Pensions Table 7.10 which can be found at


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