Occupational pensions and social assistance

Abstract

Means tested benefits, including minimum income guarantee, housing benefit and council tax benefit, are payable to bring persons with low incomes up to a specified statutory level and to assist with rent and council tax liabilities. This paper describes current UK means-tested benefits payable to pensioners and outlines the effect on entitlement to such benefits of receipt of an occupational or personal pension. It examines the aggregate income of lower income pensioners and considers whether, and in what circumstances, low-paid workers achieve a net gain from participation in occupational and personal pension schemes. The paper also refers to the impact on means-tested benefits of occupational and personal pensions not claimed. The paper goes on to examine the Government's proposals for pension credit and their potential impact on low-income pensioners with a small occupational or personal pension. It concludes that the proposals would overcome much of the current disincentive to participation in supplementary pension arrangements by ensuring that those who participate in, and contribute, to such schemes would receive in aggregate higher income than their colleagues who had not joined such a scheme.