Speeches, etc.

Margaret Thatcher

Letter to Neil Kinnock MP (pensioners and cold weather payments)

Document type: Speeches, interviews, etc.
Venue: No.10 Downing Street
Source: Thatcher Archive
Editorial comments:
Importance ranking: Major
Word count: 619
Themes: Monetary policy, Social security & welfare

Dear Mr. Kinnock

Thank you for your letter of 1 December about heating help and pensioners' incomes.

My letter of 23 November set out the assistance already given during exceptionally cold weather. Payments made under this scheme are for extra help in exceptional conditions. They are not intended to cover regular weekly needs for fuel, which for supplementary benefit recipients are provided within the scale rates and heating additions at present, and through the consolidated personal allowance and premium structure when Income Support takes over in April 1988. It is this regular weekly help which gives supplementary pensioners the assurance you seek.

You make a number of points on the growth in pensioners' incomes. You say that the average growth rate of 2.7 per cent a year in pensioners' incomes between 1979 and 1985 (compared with 0.6 per cent between 1974 and 1979) conceals “immense discrepancies” between pensioners. In fact, the difference in income between the best-off and worst-off pensioners is only half that for working people. Furthermore, the incomes of the top and bottom fifth of pensioners grew by almost the same amount over the 1979–85 period—2.8 per cent a year for the lowest fifth and 2.9 per cent a year for the top fifth. [end p1]

In respect of your specific questions:

1. Just over half of all pensioners now have occupational pensions, compared with 41 per cent in 1979. Among newly-retiring couples, the proportion with occupational pensions rises to 70 per cent, demonstrating the rapid spread of this form of income. We hope it will be encouraged further by our reforms.

2. The value of social security benefit income is of obvious importance to pensioners because state pension does form a substantial portion of income. That is why we have pledged to maintain the value of the basic state pension against inflation.

3. Even in the lowest income group, pensioners on average receive about 10 per cent of their income from private sources. The real incomes of older pensioners (who are not necessarily poorer) have matched the increase in income of pensioners as a whole over the 1979–85 period. Both for single and married pensioners, the rate of increase in the incomes of the over-75s greatly exceeded the increase between 1974 and 1979. One reason for the increase is that a high proportion of older pensioners have income from savings, which has grown strongly since 1979, and which was cut under the last Labour Government.

4. To a considerable degree, the gap between the top or bottom fifth of pensioners' incomes narrowed during the 1970s because the real incomes of better-off pensioners fell by 0.5 per cent a year between 1974 and 1979. This was the result of the impact of uncontrolled inflation on their savings and occupational pensions. We have ensured that the incomes of such pensioners have started growing again. [end p2]

5. The current impact of SERPS on the total average incomes of all those already retired is quite small. At present, SERPS accounts for only 1 per cent of total social security benefit spending on the elderly. The growth in importance of earnings-related pensions, as the scheme develops and more people retire with higher SERPS pensions, should of course mean steady growth in the numbers and proportion receiving a “second” pension of this kind.

Finally, you claim that pensioners are worse off as a result of our decision to link pension upratings to prices rather than the better of prices or earnings. The last Labour Administration demonstrated that large increases in basic pension can be meaningless as an index of pensioners' well-being. Between 1974 and 1979 pensioners lost ground compared with the incomes of people in work. Under this Government they have gained ground, and I hope they will continue to do so.

Yours sincerely

Margaret Thatcher