|State Pension Credit Bill [Lords]
Mr. Boswell: I thank the Minister for setting out several positive aspects of the Bill. Undoubtedly, some women will benefit from the credit. However, he also said in his historical exposé that many women at the time that the system was devised were not expected to work. Many subsequently had extremely broken work records and served as carers. Such people would have an incomplete entitlement to the state retirement pension when they retire. Owing to their inadequate contribution record, they need all the savings that they have to make themselves up to the minimum income guarantee before they can avail themselves of any benefit. Many women will not benefit from their savings.
Mr. McCartney: We shall return to that when we consider clause 3. However, over 53 per cent. of people who will be entitled to pension credit are single women. The hon. Gentleman cannot get away from the bottom line. Over a quarter of those who will claim pension credit are women over 80. The hon. Gentleman cannot escape the fact that the Bill represents an important policy change that benefits mainly women.
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Mr. Boswell: I do not disagree with that. However, will the Minister concede that if we examine the overall population of pensioners—those in receipt of the state retirement pension—the proportion of women in that total is higher than the 53 per cent. who he claims will benefit from the pension credit? If that is the case, is there not a disproportionate under-representation of women among the total population receiving the pension credit? It is less skewed towards them than is the total number of retirement pensioners, where the preponderance of women increases considerably.
Mr. McCartney: Sixty per cent. of women over 80 will be entitled to the credit. This is the first major policy change that benefits women in this way. If the hon. Gentleman believed that that was the case during the 18 years that his party was in charge of the basic state pension, why did he not do something about it? The Tories allowed women to languish. Many women did not get a state pension, but income support and income support rules and the tapers that existed meant that they lost everything. They had no gain at all from any kind of income, even if they had a small income that they might have scraped together. The Bill at last recognises and puts right a big wrong. I am not apologising for it.
To return to what was said about the Association of British Insurers, its report is very interesting, and is overwhelmingly supportive of the Government. The area in which it shows concern is also an area of ongoing policy work. No doubt that will be debated in the autumn, certainly by those who speak from the Front Bench for their respective parties. At that time, we will be examining the Sandler and the Pickering reviews, and the second state pensions and stakeholder pensions will begin to kick in. The policy cannot be viewed in isolation; it is part of a range of measures to develop pensions for today's and tomorrow's pensioners.
It is important that we get the regulatory regime's incentives right. I would not disagree with that. For the first time in a long time, we have a Government who are prepared to take a long-term approach to the issue. They are prepared to consider the relationship between the public and private sector, and the impact of the regulatory regime on incentives to save, on employers to make a contribution, on benefit contributions and on all those people who are outside any form of pension plan but are employed on a regular basis. Stakeholder pensions are designed to assist those people. Then there are the 18 million people whom we would let down if we did not introduce a state second pension. If we did not do so, we would replicate the mistakes of previous generations of excluding large numbers of citizens from a pension because of intermittent work records, such as women who are carers for people with disabilities. We are thinking about the future as well as the present.
The hon. Gentleman raised several issues concerning amendments Nos. 19 and 20. It is important that I give a response. I have given enough airing to the timetable for the Pension Service and what we are doing. If hon. Members
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Together with the regular publication of claims data and estimates of take-up, the reporting requirements that apply to the Department as a whole can allow the publication of all the information that is required by the amendment. The Department will continue to present its annual departmental report to Parliament. That will provide a comprehensive picture of performance across the whole Department. The report will provide an account of departmental performance against its public service agreement objectives—an innovative approach adopted since 1997. It also provides an account of how the Department has expended money voted to it by Parliament. As an executive agency, the Pension Service will be required to produce a separate annual report and financial accounts must be laid before Parliament before each summer recess. The report must contain details of performance against key targets for the year. Hon. Members said that they would want one target to cover how many people have access to pensioner credit. That is one of the major components of the work that is being done by the agency. The report will include other internal objectives and performance measures.
Amendment No. 20 would require an annual report to be laid before Parliament setting out the effect of pension credit on individuals' incentives to save for retirement. That goes to the heart of much that the hon. Member for Daventry said. As far as savings incentives go, pension credit must be seen against a much bigger picture including the state second pension, stakeholder pensions, ISAs and the supporting tax regime, which are all geared to encouraging savings for retirement.
Pension credit is fundamentally different from the benefit regime that we inherited. It is principally about fairness. We are doing away with a regime where pensioners saw no additional income from saving, as benefit was clawed back pound for pound. It was not only unfair, but created a severe saving disincentive for people who were likely to qualify for the minimum income guarantee when they retired. By contrast, under the credit individuals will see a 60p increase in their net income for every pound that they save. It will be worthwhile to save under the credit, and the results, in terms of a net increase in retirement income, will show that.
Our strategy is based on three foundations: creating the right environment for saving, providing the right incentives and ensuring that people have access to clear, impartial information that educates them towards greater financial literacy to support their making the right saving decisions. I assure the hon. Gentleman and other members of the Committee that it is in the interests of the credibility of my Department, the new executive and all those who work with older people to ensure that the reporting mechanisms that we put in place are not reporting mechanisms in name alone, but give effective and transparent information. I assure hon. Members that that will be the case.
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The amendment was well placed to seek that information. There will be robust ways in which reports will be made both inside and outside the House. I hope that the hon. Gentleman will withdraw the amendment.
Mr. Brazier: In the Minister's lengthy reply, he took the trouble to make a number of detailed points, on which my hon. Friend the Member for Daventry will no doubt be commenting in a moment.
In a brief contribution, I should like to say that although the Minister spent a lot of time commenting on amendment No. 19, he said very little about the substance of amendment No. 20, which relates to disincentives to save. They are both important amendments, but to my mind amendment No. 20 goes to the heart of what is wrong with the Bill.
The only serious criticism of amendment No. 20 came from the hon. Member for Northavon in an otherwise excellent speech. He was, however, mistaken on one point. He suggested that what was wrong with amendment No. 20, unlike amendment No. 19, was that it would not produce any valuable information because it was impossible to tell whether there was a disincentive to save as a result of any one particular measure. As disincentives to save in the case of pensions can in principle apply to people at all ages in the spectrum, and many other factors affect people at all ages in the spectrum, superficially his point might appear to be right.
I want to give a specific historical example to prove why that is wrong, providing that we segment the study by age. Lest anyone thinks that I am making a party political point, let me point to a mistake by a previous Conservative Government. In 1988, we brought in a measure that introduced very strong disincentives to save, namely the decision to capital test rather than just income test the arrangements for income support for pensioners. For my sins, I wrote a paper at the time saying that that would have a disastrous effect on savings retained by people who had reached retirement age.
Six years later, I was smug enough to publish a second pamphlet that included a graph, which I took the liberty of showing to the hon. Member for Northavon. It would be out of order to show it to the Committee, but I shall tell hon. Members what it contains. A form of measurable disincentive to save occurred as a result of a measure that dramatically extended the bite of means testing to large numbers of pensioners. Because it was combined with an increase in the provision for income support, it did so in almost exactly the same way in which this measure will extend its bite.
I shall make a final historical point before I develop my argument. We have heard arguments about how pensioners may not immediately see the economic consequences of their actions. The decline in the proportion of people living on income support—a process that continued for a generation—has been turned round. During the three-year period between 1991 and 1994, the proportion of pensioners reliant on income support rose from around 12.5 per cent. to just over 15 per cent.
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It would be deeply patronising to suggest that pensioners cannot do their sums. The overall effect of the measure will be to extend means-testing so far up the income range that before long, according to the Government's projections, it will embrace more than half of them.
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