A single-tier pension: what does it really mean? - The Institute For ...

Short-run effect on pensioner incomes
simulate data for cohorts born up to 5 July 1954. The way that we have done this
is described in more detail in Appendix B, which also provides an assessment of
the reliability of the ELSA–NI linked data and the simulated data. 38
Together, the ELSA data and simulated data provide us with a sample of the
cohorts who will reach SPA up to 5 April 2020 – that is, during the first four years
from the proposed implementation date for the single-tier pension. Table 4.1
shows some summary statistics on the sample. One point to note is that, because
of the way that the SPA for women is increasing between 2016 and 2020, far
fewer women than men will reach SPA during this period. Therefore, 69% of our
sample are men and only 31% are women.
In this chapter, we examine how our results vary across individuals with
different levels of wealth. The measure of wealth we use is total household net
wealth. This includes all financial, housing, private pension and physical assets
held by an individual and their partner (where relevant), less any outstanding
mortgages and other debts. Table 4.1 shows that among our sample, half of
individuals live in a household with total net wealth of no more than £226,823.
The men on average live in slightly wealthier households than the women in our
sample. In the following subsections, some analysis is presented by ‘quintile’ of
total net wealth. To construct these quintiles, we divide our sample up into five
equally-sized groups based on the wealth per person held by their family unit.
4.2 Comparing state pension income at SPA under
the proposed and current systems
This section describes – for individuals reaching SPA between 6 April 2016 and 5
April 2020 – how state pension income at SPA under the proposed system will
compare with what they would get under the current system. For more detail on
how pension income will be calculated in the new system and how rights already
built up under the existing system will be ‘protected’, see Sections 3.1 and 3.4.
The data we have only include information on individuals’ activities up to 2010–
11. In this section, we start by describing what individuals’ state pension rights
would be under the current and proposed systems if they then did no ‘creditable’
activities from 6 April 2016 onwards. We then discuss how this compares with
the picture if individuals expect to continue working or doing other creditable
unpaid activities between 2016 and when they reach the SPA. More detail on the
assumptions made is provided in Appendix B. 39
38
Appendix B is available online at http://www.ifs.org.uk/docs/report_singletier_pension_appendices.pdf.
39 http://www.ifs.org.uk/docs/report_single-tier_pension_appendices.pdf.
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