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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Long-run effect on <strong>pension</strong>er incomes<br />
Figure 5.5. State <strong>pension</strong> income and <strong>pension</strong> cred<strong>it</strong> eligibil<strong>it</strong>y<br />
Weekly state <strong>pension</strong> income<br />
(£; 2013–14 earnings terms)<br />
Weekly state <strong>pension</strong> income<br />
(£; 2013–14 earnings terms)<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
A. Income at SPA<br />
0 4 8 12 16 20 24 28 32 36 40 44 48<br />
Years of contributions<br />
B. Income at age 80<br />
Single-<strong>tier</strong> <strong>pension</strong><br />
Current system: low earner, at SPA<br />
SC upper threshold: at SPA<br />
SC lower threshold: at SPA<br />
Pension cred<strong>it</strong> guarantee<br />
0 4 8 12 16 20 24 28 32 36 40 44 48<br />
Years of contributions<br />
Single-<strong>tier</strong> <strong>pension</strong><br />
Current system: low earner, at age 80<br />
SC upper threshold: at age 80<br />
SC lower threshold: at age 80<br />
Pension cred<strong>it</strong> guarantee<br />
Note: <strong>The</strong>se graphs are for someone contracted in, aged 16 in 2002–03, and who is an employee<br />
continuously from 2002–03, so someone w<strong>it</strong>h 10 years of contributions here is assumed to start<br />
work in the 2002–03 tax year and stop in 2012–13. <strong>The</strong> low earner is assumed to earn between<br />
the LEL and the LET in every year they are in work (or, equivalently, is engaged in some form of<br />
S2P-cred<strong>it</strong>able activ<strong>it</strong>y). <strong>The</strong> level of the BSP is assumed to increase w<strong>it</strong>h the triple lock until April<br />
2015 and then w<strong>it</strong>h average earnings growth thereafter, whereas the value of the <strong>single</strong>-<strong>tier</strong><br />
<strong>pension</strong> is assumed to be £146.30 in 2013–14 earnings terms and uprated w<strong>it</strong>h average earnings<br />
growth after 2016. <strong>The</strong> <strong>pension</strong> cred<strong>it</strong> guarantee cred<strong>it</strong> level is uprated w<strong>it</strong>h average earnings<br />
growth and the maximum <strong>pension</strong> cred<strong>it</strong> savings cred<strong>it</strong> award is frozen in nominal terms, <strong>mean</strong>ing<br />
that the lower and upper thresholds converge w<strong>it</strong>h one another.<br />
Source: Authors’ calculations.<br />
To illustrate the impact of the abol<strong>it</strong>ion of PCSC and how <strong>it</strong> interacts w<strong>it</strong>h the<br />
introduction of the <strong>single</strong>-<strong>tier</strong> <strong>pension</strong> more clearly, Box 5.2 returns to the<br />
example of James and Box 5.3 returns to the example of Zach, both from Box 5.1.<br />
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