From the TUC

The DWP’s different approach to benefits and pensions

17 Jan 2013, by in Society & Welfare

Reading the new DWP single tier state pension white paper I was struck by this graph (on page 63).

Basic state pension as a percentage of average earnings

Basic state pension as a percentage of average earnings

This is because it bears a striking similarity to the red line on the one from my post last week on the value of unemployment benefit. They are not quite the same as different mechanisms have sometimes been used to uprate pensions and jobless benefits, but the broad shape is the same.

real value of unemployment benefit/JSA as a proportion of average earnings

real value of unemployment benefit/JSA as a proportion of average earnings (red line)

What’s really interesting is the different conclusions drawn by different parts of the DWP (or more likely the Treasury).

For pensions it is a bad thing:

As the Pensions Commission pointed out in 2005, the value of the State Pension reduced significantly in relation to earnings after the late 1970s.64 At its peak in November 1979, the basic State Pension was equivalent to 26 per cent of average earnings (in April 2012 earnings terms that would have been equivalent to £157.85 per week, whereas the actual full rate of basic State Pension is £107.45). This devaluation of the basic State Pension has created a greater reliance on means-tested benefits within the state pension system, with around 40 per cent of current pensioners now eligible for Pension Credit.

But for benefits, the focus is only on the anomalous pattern of the last few years when prices have outstripped earnings. So the government wants to give everyone a flat-rate pension which will be better for (many) poor people, but reduce the value of benefits going to those of working age including the unemployed.

TUC