State Pension Credit Bill [Lords]

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Mr. James Clappison (Hertsmere): In the case of women aged 60 to 64, would it help if we assumed that earnings would be treated in the same way as savings and counted as income towards the system?

Mr. Webb: I might need to think about that. We will come back to earnings. The Minister may argue about the cost of the amendment. However, to the extent that it relates to women aged 60 to 64 it is an issue of justice. The Government have raised the expectations of a group of people. They may say that they have made it perfectly clear that savings credit starts at 65, but let us be honest about such matters. If it were said in a ministerial announcement that pensioners were to be rewarded for saving, that is probably as much as people would take in. The idea that there are two components and that one develops at one age while another develops at another, is pushing it a bit. Expectations have been raised and they should be honoured.

What would be the cost if the proposal related to men aged 60 to 64? We are referring to poorer people. We are imputing a pension. Men who had not contributed to a pension would not receive much savings credit, so we would be rewarding men of that age with small savings. That is not unreasonable and, if they are in the system, it may improve take-up when they are 65. I am talking about equality and dealing

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with women pensioners who thought that they would be rewarded for saving, but who will not receive that reward until they are 65. There are plenty of precedents, including the Bill, for equalisation at 60 for men who are not state pensioners and imputing in the way set out under amendment No. 2. The fact that people would receive the pension that they had accrued so far would deal with the problem that only those with big savings would receive a reward. The proposal is modest and reasonable and one that the other place has not had the chance to consider in the form set out by the amendment. I commend it to the Committee.

Mr. Boswell: The hon. Member for Northavon has put his argument clearly and imparted some ingenuity into his thoughts. I almost became animated when I first thought that I would need to declare an interest to the Committee given that I attained my 60th birthday this year. However, as the hon. Gentleman rightly reminded us, given that I am in receipt of a parliamentary salary, it is relatively unlikely that I would be unable to avail myself of the pension credit, although I suppose that I could invent certain circumstances. I therefore feel no inhibition when speaking about it.

The hon. Gentleman set out his requirements, which would have been mine, too, for the Under-Secretary to respond about the cost involved. That is not a trivial matter. I referred to it in our earlier debate on double provision. Ministers must have regard to the cheque element.

Secondly, as Lord Higgins said in another place, an issue of equity is involved. Equalising the pension age is a delicate issue, but all Committee members accept that whatever is introduced should be equal for people of the same age. That principle is incontestable. The issues are whether we opt at one end or the other, the cost involved and whether the proposal is deliverable. That is a reasonable question to which the Under-Secretary should respond.

I would add only one further point, which relates to the legal advice that Ministers have received on the matter. I return jocularly to my forthcoming, but no doubt somewhat delayed, until September next year, winter fuel payment. The matter has arisen simply because the court embarrassed the Government into having to make changes in such a way that they now claim credit for their generosity. It would be out of order to discuss that. However, legal interpretation does not always coincide with that of Governments. Will the Under-Secretary assure us that no legal whoopsy is likely to make a retrospective adjustment necessary, perhaps in relation to women under the age of 65? Might that adjustment be extended to men in that category? I do not have a sufficiently refined legal mind to have the slightest idea whether that is a risk. I understand that the Bill introduces a new benefit that is income contingent, but I should like the Under-Secretary's assurance on that point and her response to the general points made, which should be considered before we move on.

Maria Eagle: ''Whoopsy'' is a legal term that I have not come across before. Perhaps it has been introduced into the law since I allowed my practising certificate to

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lapse. I shall do my best to deal with the points made by the hon. Members for Northavon and for Daventry.

Amendment No. 1 would make the savings credit available to both men and women from the same age as the guarantee credit—currently 60. The hon. Member for Northavon makes it clear that he accepts the need to equalise, which is essential. I do not believe that it is purely a legal matter—although we are, rightly, open to challenge from all quarters if there is a hint of gender inequality in respect of the provision. Our approach has been driven by trying to ensure that the provision is as equal as possible, not only to prevent us from being challenged in that way but because we believe that there should be equality.

The difficulty that we face in trying to work out an approach to the matter is the inequality that remains in basic state pension provision, of which Parliament has taken cognisance. The previous Conservative Government introduced legislation to provide for equalisation in due course. However, as always with pensions, things have to be done over a period, rather than immediately. The intention is that state pension age will rise gradually from 2010 through to 2020. The period from 1995 has been given in order to ensure that women can make proper provision and that there is no adverse effect on people's long-term planning. Until then, however, we have an inequality in basic state pension provision.

Mr. Boswell: Is not the real difficulty—and the dilemma with which everyone must wrestle—that, in removing the gender inequality for those below the age of 65, and not extending the provision, irrespective of the cost of doing so, the Under-Secretary introduces a new discrimination between female pensioners under the age of 65 and those above that age? Both may have the same external income and the same entitlement to the basic state retirement pension, but under the proposals the one below that age will not receive the savings credit while the other will. In dealing with the gender issue, she has created an invidious—although, I accept, difficult to solve—discrimination between classes of female pensioners.

10.45 am

Maria Eagle: I hear the hon. Gentleman's point. Equality will not be achieved in general provision until 2020, so it is difficult to devise a way of bringing equality into this provision sooner than that. We discussed different ways of dealing with the inequality inherent in the system. We have all wrestled with the problem and it is clear from the amendments moved by the hon. Member for Northavon that he has also examined it. We went through a similar process of trying to find a way of making the provision as fair as possible, while realising that there is basic inequality in the system on which it is built.

We looked at the problem with great care, but the lowest age at which the savings credit can be paid equally and fairly is 65, which is what we propose. In any case, men can expect to continue building their pension provision until that age. Therefore, other inequalities are introduced because they would receive a reward on the basis of what is not their full

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entitlement—because it is continuing to be accrued. The effect of the hon. Gentleman's amendments would be to build in further unfairness, which we cannot do.

Mr. Webb: The hon. Lady says that bringing 60 to 64-year-old men into the system on the basis of the pension that they have accrued so far would be unfair. I cannot believe that any of those who receive the money would say, ''No, I do not want it. It is not fair because I might accrue some extra pension.'' They would tolerate the unfairness and thank the Government for bringing them into the system.

Maria Eagle: Until the basic state pension has completed the process of being made gender neutral, there will be inequalities in the system somewhere however we decide to tackle the problem. The difficulty that we face arises because the current state provision is not paid equally to men and women until the age of 65. That is why we have decided to make that the age at which savings credits are paid. Until equality is achieved, there will be an anomaly.

Sandra Osborne (Ayr): This subject is of concern to many people. I especially hate to see women losing out in any way. However, I recognise the great difficulties involved in trying to reach an equitable solution. Will the Under-Secretary tell us how many women between the ages of 60 and 64 are likely to be affected?

I admit to some difficulty in following the proposal of the hon. Member for Northavon, which was extremely complicated. I am not sure that it would be workable. The Under-Secretary says that she has examined the issue in detail, so will she tell us the numbers involved and whether the provision would be open to legal challenge if such an amendment was accepted?

Maria Eagle: I shall deal with that point in due course.

The age of 65 is the first point at which we judge that the savings credit can be fairly and equally paid to ensure that we are not open to legal challenge in respect of gender equality. However, the amount of savings credit depends on the amount of existing state provision. If it were paid to those aged 60 to 64, men and women would have different outcomes solely because of the unequal nature of the state provision. That is the difficulty in making the change suggested by the hon. Member for Northavon. We cannot fairly pay savings credit until an age at which the provision is equal for men and women, which is 65.

The hon. Gentleman recognises the problem of paying the credit under that age, because that is what his second amendment seeks to ameliorate. He is with us that far—he has spotted the problem. However, worthy though his amendment is, it would only make things worse. He tries to sort out the problem by saying that we can estimate the amount of basic state pension that a man has accrued on his contribution record

    ''at the time of the claim.''

The amendment would make the problem worse because there would be a huge administrative cost involved in estimating the accrued pension entitlement of 400,000 men. It would also produce unfair results

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and the kind of effects that we want to avoid. Different amounts of pension credit would be payable to people in otherwise identical circumstances, purely because of the difference between state provision for men and for women. That would open us to the sort of legal challenge to which the hon. Gentleman referred.

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