Select Committee on Work and Pensions Appendices to the Minutes of Evidence


Annex

ILLUSTRATIONS OF S2P AND PENSION CREDIT ENTITLEMENTS

ASSUMPTIONS:

    (a) Figures are in 2002 price terms.

    (b) Earnings are assumed to increase at 1.5 per cent pa faster than prices.

    (c) Guaranteed credit increase with earnings.

    (d) Savings credit threshold increases with prices.

    (e) If S2P goes flat rate in future, the person will contract out where appropriate and then receive

the same pension from the private arrangement as he would have had if S2P did not go flat rate.

    (f) The person is a single pensioner who has a full working life and no other private pension provision or savings.

Example 1

RETIREMENT IN 2025 (£ PER WEEK)

Earnings per
week in 2002
Basic State Pension
SERPS/
S2P
Guarantee Credit limit
Guaranteed Credit
Savings Credit
Total
pension credit
Percentage increase in income
100
75
40
136
22
23
45
17 per cent
200
75
56
136
6
33
39
24 per cent
300
75
78
136
0
30
30
20 per cent
400
75
101
136
0
21
21
12 per cent
500
75
123
136
0
12
12
6 per cent
600
75
139
136
0
6
6
3 per cent
700
75
144
136
0
4
4
2 per cent
800
75
144
136
0
4
4
2 per cent

Note:

The initial level of pension income in retirement above which no pension credit will be payable is £229 per week.

Example 2

RETIREMENT IN 2051 (£ PER WEEK)

Earnings per
week in 2002
Basic State Pension
S2P
Guarantee Credit limit
Guaranteed Credit
Savings Credit
Total
pension credit
Percentage increase in income
100
75
120
201
6
72
78
36 per cent
200
75
120
201
6
72
78
36 per cent
300
75
139
201
0
70
70
33 per cent
400
75
152
201
0
65
65
29 per cent
500
75
160
201
0
62
62
26 per cent
600
75
163
201
0
60
60
25 per cent
700
75
163
201
0
60
60
25 per cent
800
75
163
201
0
60
60
25 per cent

Note:

The initial level of pension income in retirement above which no pension credit will be payable is £390 per week.


 
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Prepared 12 April 2002