Briefing Note 5 - The effect of the Conservative Party's pension policy
The benefit levels of the Basic State Pension (BSP) and the second state pension (SERPS for people retiring now) increase each year at least in line with the retail price index. There is also a means-tested top-up income available, the Guarantee Credit (GC) and a Saving Credit (SC) which rewards saving above the BSP. GC is expected to increase each year at least in line with average earnings, although this is not a statutory requirement. The Conservative Party has put forward new proposals aimed at stopping the spread of means-testing. They propose to reverse the index-linking practice: index the BSP to earnings, and the GC to prices.
This Briefing Note compares the outcome of this proposal to the outcome of continuing current policy. It finds there are two groups who would gain financially from the proposed Conservative policy; higher earners who would see the full impact of the faster increase of state pensions, and poorer pensioners who do not claim their GC now, although these people would be worse off compared to their situation if they did claim GC now.
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Keywords: state pensions, state pension, Conservative, basic state pension, pension credit