Making pensions more universal: a few wild guesses about costs

Following discussions about the potential for extending universal pensions in Scotland, I’ve been putting together a few back-of-the-envelope calculations about costs.  The figures I’m drawing on aren’t reliable, for all sorts of reasons: the sample surveys can mislead when the numbers are very low, the figures aren’t consistent, it’s not clear how many people would actually receive their entitlements and we’d still need to consider the implications for Pension Credit.

The universal pension for people over 80, Category D of the State Pension, goes to people whose pension entitlement is less than the level of the pension, currently £69.50 a week.  I’m going to call that 50% of the basic pension, though actually it’s a bit more than that.   At present there are 2,700 recipients of Category D Pensions in Scotland (though if you look at the breakdowns you’ll get an inconsistent count  which suggests that there might be more than 3,200 claims).   If we wanted to increase Category D Pensions for people over 80, more people would be entitled;  I reckon that topping up the existing Category D pension to 75% of the basic state pension could cost the Scottish Government about £44m, topping up to a full pension might cost up to £78m.  It should cost much less if we got back the savings to Pension Credit under the ‘no detriment’ principle, but I’m not sure I believe that the DWP and the Treasury will honour that principle.

Beyond that, there’s the option of extending the universal pension to people who are younger than 80.  Extending the existing category pension to people aged 75-79 wouldn’t cost much – in Scotland there are only about 500 people in that age group who get less than 50% of the state pension, and the top up should cost less than £2m.  Bringing them in to a more extended scheme  at 75% of the basic pension would cost  a lot more, probably £47m, because there are nearly 40,000 people in that income bracket, and taking it up to a full pension would cost up to £87m.

The point of all this is, of course, to say that Scotland now has the chance to do things with benefits that are about much more than transferring administrative responsibility.  I’m hopeful that they will.

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