Guaranteed Minimum Pension

Oral Answers to Questions — Social Security – in the House of Commons at 12:00 am on 23 January 1996.

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Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest 12:00, 23 January 1996

To ask the Secretary of State for Social Security what proposals he has to introduce a guaranteed minimum pension; and what estimate he has made of the cost of a guaranteed minimum pension of £80 a week. [8796]

Photo of Oliver Heald Oliver Heald Parliamentary Under-Secretary (Department of Social Security)

We have no plans to introduce a guaranteed minimum pension. It is estimated that a scheme of this type, based on £80 a week, would currently cost up to £5 billion.

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

Does my hon. Friend agree that the best way to deal with the challenges of an increasingly aging society is not through a guaranteed minimum pension, which may not be sustainable, but by better targeting of benefits towards those who most need them, and the provision of private pensions? Is it not interesting that it has been announced today that £600 billion is invested in investment funds and pension schemes in this country, which is a far greater sum than is invested in all the other European countries put together?

Photo of Oliver Heald Oliver Heald Parliamentary Under-Secretary (Department of Social Security)

A guaranteed minimum pension would force every pensioner to submit to a means test. It would amount to a tax on thrift. Many people who had a private pension would receive nothing—there could be no greater disincentive to save. As my hon. Friend said, £600 billion is invested in private pension schemes in the UK. That money is invested efficiently, unlike money invested in the stakeholder scheme, in which the trade unions would be involved and which might produce poor returns such as they have in Singapore.

Photo of John Denham John Denham , Southampton, Itchen

Is not the truth that, under the Tories, more than 3 million pensioners are today forced to depend on means-tested benefits, and perhaps 750,000 do not apply for their entitlement? Is it not also true that more than 1 million pensioners receive less than 20 per cent. of average male earnings—the amount provided by the basic state pension alone in 1979? Is not the truth behind the Minister's words that the Government have betrayed today's generation of pensioners and are in the process of betraying tomorrow's?

Photo of Oliver Heald Oliver Heald Parliamentary Under-Secretary (Department of Social Security)

The hon. Gentleman is right: take-up is important. That is why the Government have set up about 80,000 information points to which we send information about pensions so that pensioners are aware of their rights. The hon. Gentleman got carried away with his rhetoric. The rise in pensioners' incomes since 1979 has been 51 per cent. in real terms. Some £1.2 billion of extra help has been given to those on income support. When the hon. Gentleman considers the proposals that he suggests for stakeholding or stateholding, does he think that a return rate of 2 per cent. is anywhere near equivalent to the performance of our private sector pensions, which currently give a return of 10 per cent?