The MIG was introduced by the Government to provide financial support for the poorest pensioners. It was introduced to replace income support which was felt as providing an inadequate benefit, and which was not claimed by many eligible recipients.
The Government has not only announced that it will increase the MIG in line with earnings next year – ie. it will be worth £82 per week for a single pensioner and £127 per week for a pensioner couple (increased amounts will be payable to the over 80s), but that it will also amend the capital rules attached to the MIG with effect from April 2001.
The MIG is a means-tested benefit and at present an individual may only have £3,000 of savings without suffering any reduction in their MIG benefit. Any savings in excess of £3,000 will result in a reduction of the MIG until savings reach £8,000 when the MIG will be lost altogether. With effect from April 2001 an individual will be allowed £6,000 of savings before the MIG is reduced and the MIG benefit will not be lost altogether until an individual has savings of £12,000.
The Government also wants to use the MIG to reward low income pensioners who have made some pension provision for themselves and others who are currently just above the MIG levels. Accordingly, the Government will be considering whether through an income taper or other measures the MIG can provide extra help to people who have provided for themselves. It is intended that proposals will be published after further work by the Treasury and DSS, with a view to these being implemented during the next Parliament. The success of this review may be fundamental to whether stakeholder pensions achieve their objectives. It has been argued that it would not currently be advantageous for many lower paid employees to establish a stakeholder pension as any such benefits would only reduce the Government's liability to provide them with MIG. If a successful formula can be devised whereby such individuals can set up a stakeholder pension without reducing/removing their ability to receive the MIG this should help the take up of stakeholder pension