Means Tested Benefits: Personal Savings

Work and Pensions written question – answered on 21st January 2008.

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Photo of Tony Baldry Tony Baldry Conservative, Banbury

To ask the Secretary of State for Work and Pensions what assessment he has made of the effect of means-tested benefits in retirement on incentives to save.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

As part of its research and analysis programme over the last few years, the Department has published several analyses on incentives to save in a pension, and the role of income related benefits. This includes Projections of Pension Credit Entitlement, Financial Incentives to Save for Retirement, the Pensions Bill—Impact Assessment, and the Gender Impact Assessment of Pension Reform. These analyses show that, under reasonable assumptions about factors such as investment growth, the large majority of individuals likely to be affected by private pension reform—including many of those who may end up on income related benefits in retirement—can expect to benefit from saving.

The Department also commissioned work on savings incentives from NIESR (The Effects of Means-testing Pensions on Savings and Retirement) and IFS (The Importance of Incentives in Influencing Private Retirement Savings: Known Knowns and Known Unknowns). These found, respectively, that the introduction of pension credit in 2003 strengthened incentives for lower-income households to save for retirement, and that many individuals face positive incentives to save in a private pension.

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