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

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Short-run effect on pensioner incomes former case, they would not be entitled to any state pension. In the latter case, they would only be entitled to any state pension on the basis of their own contribution history, rather than that of their partner. Figure 4.2 shows the difference between the state pension income that people will get under the single-tier system and the income they would get from the current system at SPA. 40 A positive number indicates that entitlement under the single-tier system will be greater than entitlement under the current system. Figure 4.2. Distribution of change in state pension income at SPA under proposed system compared with current system – assuming no further ‘contributions’ after April 2016 Cumulative percentage of individuals 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% All Men Women 0% -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Difference between entitlements under single-tier and current systems (£ per week at SPA, 2013–14 earnings terms) Source: Authors’ calculation using English Longitudinal Study of Ageing and National Insurance administrative data. Among the sample as a whole, just 18% will see an immediate increase in their state pension income as a result of the single-tier reforms. Women are much more likely to face this immediate gain than men, with 44% of women facing an increase in their entitlement as of 2016 compared with just 6% of men. The percentage seeing an increase in their state pension income of more than £5 per week is 15% (6% of men and 35% of women); 10% will see an increase of more than £10 per week (4% of men and 24% of women). The vast majority (78%, including 91% of men and 50% of women) will see no immediate change in their state pension income. Of this group, a third (or 25% of the sample as a whole) will see essentially no change in their state pension income because they will already have accrued state pension income in excess of £146.30. 40 Figure A.1 in Appendix A shows the equivalent figure for the subsample of individuals who would be entitled to less than £146.30 per week under the current system. (Appendix A is available online at http://www.ifs.org.uk/docs/report_single-tier_pension_appendices.pdf.) 29
A single-tier pension: what does it really mean? Only a very small fraction of our sample (4% of all individuals, including 3% of men and 6% of women) would see a reduction in their pension entitlement by £1 per week or more as a result of the proposed system. Around half of these women are those who fall below the 10-year minimum contribution condition and around half of the women are those who would qualify for a Category B pension under the current system but not under the single-tier system. That so few people in our sample are affected by the minimum contribution condition is not surprising since our sample is of the English household population and DWP asserts that most people who will be affected in this way currently live outside the UK. Those women who do fall foul of the minimum contribution condition may be able to boost their state pension entitlement by paying voluntary class 3 contributions to improve their record. This would be possible if they had any years from 2006 onwards for which they have not yet received a credit. 41 The resulting distribution of state pension entitlements under the single-tier system is shown in Figure 4.3. Table 4.2 summarises the level of state pension income received under the current and proposed systems. This shows that 34% of men and 23% of women would have a pension income of at least £146.30 per week. In other words, 3% of men and 14% of women would see their state pension income at SPA boosted up to the full single-tier amount. Figure 4.3. Distribution of state pension income at SPA under proposed rules Cumulative percentage of individuals 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% All Men Women Single-tier amount 0% 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 State pension income at SPA (£ per week, 2013–14 earnings terms) Source: Authors’ calculations using English Longitudinal Study of Ageing and National Insurance administrative data. 41 Source: http://www.hmrc.gov.uk/drafts/ss-conts-amedn-regs13.pdf. 30
Page 1 and 2: A single-tier pension: what does it
Page 3 and 4: Published by The Institute for Fisc
Page 6: Contents Executive Summary 1 1. Int
Page 11 and 12: 1. Introduction In a White Paper pu
Page 35: A single-tier pension: what does it
Page 55 and 56: 5. Long-Run Effect of the Proposed
Page 69 and 70: 6. Wider implications of the propos
Page 75 and 76: 7. Conclusions Pensions Bill 2013-1
Page 77 and 78: References Attanasio, O. and Rohwed

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