Pensioners: Means Tested Benefits

Treasury written question – answered on 5th March 2007.

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Photo of Frank Field Frank Field Labour, Birkenhead

To ask the Chancellor of the Exchequer how many pensioner households were subject to (a) 20, (b) 30, (c) 40, (d) 50 and (e) 60 per cent. and above marginal deduction rates taking account of tax deduction and loss of means-tested benefits in (i) the most recent year for which figures are available and (ii) 1997-98.

Photo of James Purnell James Purnell Minister of State (Pensions Reform), Department for Work and Pensions

I have been asked to reply.

The available information is given in the table. Comparable estimates for 1997-98 are not available and could be obtained only at disproportionate cost.

The Government's strategy to tackle pensioner poverty since 1997 has helped to lift one million pensioners out of relative poverty. The introduction of pension credit has also reduced significantly the number of pensioners facing 100 per cent. marginal deduction rates—between 1.8 million and 2.2 million pensioner households were entitled to income support in 1997-98 and would have faced £1 for £1 deductions on additional income.

The proposed reforms to the state pension system will ensure that those with a good history of working or saving towards retirement will be taken clear of pension credit entitlement while maintaining a minimum income for those who were unable to build up a sufficient state or private pension.

Estimated marginal deduction rates for pensioner households, 2006-07
Marginal deduction rate (Percentage) Number of pensioner households Percentage of pensioner households
0 to 9 300,000 3
10 to 19 270,000 3
20 to 29 3,230,000 37
30 to 39 650,000 8
40 to 49 630,000 7
50 to 59 1,390,000 16
60 to 99 1,320,000 15
100 890,000 10
Notes:

1. Marginal deduction rate estimates measure the effect on net income of a marginal increase in gross income, assuming this is fully taken into account for income tax and income-related benefit entitlements.

2. Estimates assume full take-up of income-related benefit entitlements.

3. Estimates of numbers of pensioner households are rounded to the nearest 10 thousand.

4. Estimates of percentages of pensioner households are rounded to the nearest per cent. and may not sum to 100.

Source:

DWP Policy Simulation Model

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