A single-tier pension: what does it really mean? - The Institute For ...
A single-tier pension: what does it really mean? - The Institute For ...
A single-tier pension: what does it really mean? - The Institute For ...
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Short-run effect on <strong>pension</strong>er incomes<br />
Table 4.5). <strong>The</strong> gains are greater on average among women than men – £5,381<br />
compared w<strong>it</strong>h £3,396. This is not only because women gain more state <strong>pension</strong><br />
income on average but also because they are expected to live for longer post-SPA<br />
on average. Low-wealth individuals gain more on average than high-wealth<br />
individuals: those in the poorest wealth quintile gain £5,607 on average<br />
compared w<strong>it</strong>h £2,368 among the highest wealth quintile.<br />
4.4 Interaction w<strong>it</strong>h <strong>mean</strong>s-tested benef<strong>it</strong>s<br />
So far, this chapter has examined how state <strong>pension</strong> income will change as a<br />
result of the proposed <strong>single</strong>-<strong>tier</strong> reforms. As Table 4.5 showed, the largest gains<br />
in state <strong>pension</strong> income are concentrated among lower-wealth households;<br />
however, these households are more likely to be eligible for <strong>mean</strong>s-tested<br />
benef<strong>it</strong>s, and so some of the changes in state <strong>pension</strong> income will be offset by<br />
changed ent<strong>it</strong>lement to <strong>mean</strong>s-tested benef<strong>it</strong>s. Ignoring this interaction<br />
overstates the cash gains and losses from the reforms for those who receive<br />
<strong>mean</strong>s-tested benef<strong>it</strong>s. While individuals might of course prefer to have non<strong>mean</strong>s-tested<br />
income rather than <strong>mean</strong>s-tested income, even if the amounts are<br />
the same, <strong>it</strong> is important to examine whether households’ net income in<br />
retirement will actually be increased as a result of the state <strong>pension</strong> changes<br />
described above. Furthermore, although the removal of the PCSC is a coherent<br />
part of the <strong>single</strong>-<strong>tier</strong> proposals, <strong>it</strong>s proposed abol<strong>it</strong>ion also has the potential to<br />
reduce income for these cohorts.<br />
To assess the potential impact of the reforms on net household incomes, we have<br />
estimated <strong>mean</strong>s-tested benef<strong>it</strong> ent<strong>it</strong>lement under the current and proposed<br />
systems, using information on state <strong>pension</strong> ent<strong>it</strong>lements of the individual and<br />
their partner (where relevant) from the NI data and information on the<br />
individual’s and their partner’s private <strong>pension</strong> rights and household wealth<br />
holdings from ELSA. In these calculations, we take into account ent<strong>it</strong>lement to<br />
<strong>mean</strong>s-tested <strong>pension</strong> cred<strong>it</strong> but we ignore potential ent<strong>it</strong>lement to other <strong>mean</strong>stested<br />
benef<strong>it</strong>s, in particular housing benef<strong>it</strong> and support for council tax. We also<br />
assume full take-up of <strong>pension</strong> cred<strong>it</strong>. Since, in real<strong>it</strong>y, take-up is not complete,<br />
we will be overstating the extent to which the gains from the <strong>single</strong>-<strong>tier</strong> <strong>pension</strong><br />
are offset by reduced <strong>mean</strong>s-tested benef<strong>it</strong> income.<br />
Means-tested benef<strong>it</strong> ent<strong>it</strong>lement depends not only on the income of the<br />
individuals described above but also on the circumstances of their partners.<br />
<strong>The</strong>refore, in the analysis presented below, rather than focusing on income in the<br />
year in which the individual reaches SPA (as we have done above), we instead<br />
examine the family’s income in the year in which the last individual in the couple<br />
reaches SPA. We have dropped from our sample a small number of individuals<br />
(49 people, less than 5% of our sample) who reach SPA between 6 April 2016 and<br />
5 April 2020 but who have significantly younger spouses (who reach SPA later<br />
than 2026), since for these people this exercise would require examining income<br />
a long time in the future.<br />
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