Headlines: February 23rd, 2001

An analysis of the modernisation of pensions income has found that the Government is successfully targeting the least well-off.It also shows that this is achieved by heavy dependence on means testing, with the problems that brings of achieving fairness when a variety of benefits are claimed, which often offset each other.

The Institute of Fiscal Studies (IFS) has looked at the proposals in the November 2000 pre-Budget report for a major package for pensioners – an above-inflation basic pension increase, substantially above-inflation increases in the means-tested Minimum Income Guarantee (MIG) in each of the next three years, and from April 2003, the introduction of a new element into the means-tested benefit system known as “Pension Credit”.

Overall, the IFS says, the package means the Government will pay over 4 billion pounds extra annually to pensioners by 2003/04.

By 2003 the average single pensioner will gain 9.68 pounds per week, while the average pensioner couple gains 11.05 pounds.

Report author Tom Clark says that once the full package is implemented, 60% of the entitlement created will be income based.

His analysis goes on to show that it will take a very fine balance of this new initiative with other benefits, such as housing benefit, for many families to feel much better off. In many cases there will still be examples of older people claiming a new benefit, only to lose at least a percentage of an existing one.

IFS Briefing Note No. 17 Recent Pensions Policy and the Pension Credit, is on-line at www.ifs.org.uk/pensions/bn17.pdf .