The pensions maze

Basic State Pension

What is it? The basic pension is a cornerstone of the welfare state.

How much is it worth? £67.50 to a single pensioner, £107.90 to a pensioner couple a week.

Who gets it? People who have reached retirement age - that's 60 for women and 65 for men although this is due to be changed between 2010 and 2020 to 65 for both sexes.

Are pensioners entitled to more as they get older? Pensioners entitled to the Minimum Income Guarantee see an increase at 70 when a single pensioner receives £78.45 and a pensioner couple £121.95.

At 75 a single pensioner entitled to MIG gets £80.85 and a couple £125.35

That rises again when they reach 80 - to £86.05 for a single pensioner and £131.05 for a couple.

The Minimum Income Guarantee

What is the MIG? A mechanism that allows the poorest pensioners - those with little or no other income - to claim a benefit top-up, taking their pension to £78.45.

Is that likely to increase? Chancellor Gordon Brown has indicated he will raise the amount so that no pensioner is forced to live on less than £90 a week.

Is the MIG a disincentive to save? Critics say it discourages saving because the MIG decreases for people with between £3,000 and £8,000 in savings, until the point that if their savings exceeds the upper figure they receive only the basic pension.

What is being done to address this issue? Mr Brown has announced the introduction of a pension credit.

Pension credits

What's a pension credit? The pension credit is designed to reward private pension-saving, rather than punishing it under the means test.

How does that work? Under the pension credit, private pensions would be taken into account, so less of the MIG benefit would be lost.

Will that take immediate effect? No. Details are to be published in November and it will probably come into force by 2003.

The earnings-related link

What is the earnings-related link? It was a mechanism which ensured that pensions mirrored national prosperity by rising in line with earnings.

What happened to it? Tory Prime Minister Margaret Thatcher abolished it in 1980.

Why won't Prime Minister Tony Blair re-introduce it? Because he says that although the country can afford it at the moment, it may not be able to in the future.

Who wants it re-introduced? Labour's old allies the unions, a large number of Labour Party members, not to mention pressure groups like Age Concern.

How about the other political parties? Liberal Democrat leader Charles Kennedy's reason for not restoring the link was the same as Mr Blair's, although he pledged his party to increase the basic pension by up to £15 per week.

Tory leader William Hague said he wanted to scrap benefits such as the MIG, introduced by Labour, to fund an increase of up to £10 on the state pension.

How much would the state pension be worth if the link with earnings still existed? £97.45 for a single pensioner and £155.80 for a pensioner couple.