Pensions

The Government have made the point that over the past 20 years, the gap between the incomes of rich and poor pensioners has grown dramatically. The Government is committed to developing sustainable policies which tackle pensioner poverty and which enable pensioners to share in the country&#39s rising prosperity.

Around 2 million pensioners benefit from the extra support the Government introduced through the Minimum Income Guarantee (MIG) and it is intended that this will be uprated in line with earnings throughout this Parliament.

This Pre-Budget Report outlines the next steps in the Government&#39s strategy to tackle pensioner poverty by:

• introducing a new Pension Credit
from 2003 to tackle the unfairness and complexities of the old system and ensure that pensioners on low and modest incomes are rewarded, rather than penalised, for their savings;

• guaranteeing that the annual basic State pension will rise by £100 for a single pensioner and £160 for pensioner couples in 2003/2004. Subsequently the basic state pension will rise each year by 2.5 per cent or the increase in the September Retail Price Index, whichever is higher
. This builds on the increases in 2001/2002 and 2002/2003 that benefited single pensioners by £4.55 above prices; and

• maintaining the winter fuel payment – paid annually to around 8 million households – at £200 for the remainder of this Parliament.

The Pension Credit is intended to deliver substantial gains to all pensioners on low and modest incomes. Around half of all pensioner households stand to gain. The new Credit will:

• guarantee a minimum income for pensioners;
• reward saving for retirement;
• revise the MIG capital regime;
• abolish the weekly means-test; and
• protect the position of people on Housing Benefit and Council Tax Benefit.

(The Secretary of State for Work and Pensions is due to publish details of the Pension Credit on Wednesday 28 November).

As far as pension annuities are concerned, the FSA are to report early next year on the outcome of consultation on making policyholders aware of the availability of the open market option before they retire. Based on the continuing development of annuities on offer in the marketplace, the Government plans to publish a consultation document on how better to promote competition in this market. It has been reported that this document will examine the rules that require an annuity to be purchased by no later than age 75.