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Miss Anne Begg (Aberdeen, South) (Lab): Does my right hon. Friend agree that the pathways to work pilot shows an increase in the number of people who are coming off incapacity benefit and going into work? If the Government are allowed to continue with that project and it is not put at risk by the Conservative party, there will be a big downturn in the number of people who receive incapacity benefit.
Alan Johnson: My hon. Friend is absolutely right. On Monday, I announced to the House the very positive early findings of our groundbreaking pathways to work project. We are already seeing improvements in recorded job entries for people in pathways to work areas throughout the country. The number of people going into jobs is twice the average. There is also a sixfold increase in the number of people taking up new deal programmes and training for work. That is another significant development.
In fact, the pathways to work project is proving so successful that, as I also mentioned on Monday, people who have been on incapacity benefit for more than a yearthe experiment relates to that cohortare knocking down our doors to take part in the project.
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They are saying that they have been left for years with no help, and they view the project as a significant step forward. So the Government have made a huge difference to millions of lives across the country, by acting across the whole welfare reform agenda, to tackle the pernicious problems that we inherited in 1997.
We are proud of the fact that we have lifted 700,000 children above the poverty line, virtually eradicated youth unemployment, transformed disability rights, halved unemployment and cut pensioner poverty by two thirds, but we need to go further. There is no bigger long-term challenge for domestic policy than that highlighted by yesterday's Turner report. There is no area of domestic policy in which there is a better case for examining the evidence in detail, avoiding knee-jerk reactionsas Adair Turner virtually pleads with us to do, as politiciansand working towards a plan for the long term. I hope that there is at least consensus on the approach urged on us by the Pensions Commission.
I want to concentrate on what the Government are doing to meet the challenges set out in the commission's report and to talk about how we intend to move towards a long-term, evidence-based approach that seeks to attract the consensus for which the commission pleaded. The report builds on the analysis of our 2002 Green Paper, which showed that many people ought to be saving more or working longer if they want to realise the kind of lifestyle to which they aspire in their retirement. Although the report deliberately does not draw conclusions at this stage, it emphasises that more people choosing to work for longer must be a crucial part of the response to longer lives. That is a difficult message. There were many difficult messages for politicians on both sides of the House, individuals and employers, but it is right that we address the issues that Turner raises in that analysis.
We believe that, given our age discrimination legislation, we are already committed to giving people greater opportunity to work for longer if they wish to do so. Crucially, in the Pensions Bill, we are increasing the rewards for working beyond state pension age. Our policy of state pension deferral will increase the increments for deferring to 10.4 per cent. a year, which will produce a basic state pension of about £120 for someone deferring until 70. Under measures in the Finance Bill, for the first time people will be able to continue to work while drawing an occupational pension from the same employer. That is an important contribution as well.
Of course, part of any increase in average retirement ages can come from increasing employment rates before state pension age. Our problem at the moment is that two thirds of men are out of the employment market by the time they reach 62, let alone 65. The report shows that those employment rates are rising, so there is cause for optimism. The rates have increased by 8 per cent. in the past 10 years, but the report says that they "could rise significantly more". So the Government are already taking steps to maximise the possible impact of people choosing to work for longer. Helping people to build up pensions is the other half of the equation.
A crucial reform that has been barely mentioned in any of the coverage that I have seen is that, under the state second pension, for the first time women, carers, the long-term disabled and others with incomplete contribution recordsto return to the problem that we were talking about earlierare no longer losing out on building up rights to the state pension. The state second pension is up to twice as good as its predecessorthe state earnings-related pension schemeso 20 to 30 years down the line, pensioners could retire with double what they would get under the basic state pension.
Mrs. Lait: I interrupted the right hon. Gentleman when I did because I thought that he might move on to the private pension sector. Before he does soI accept entirely both Adair Turner's point about not rushing into hasty decisions and the right hon. Gentleman's agreement with that statementwill he say whether he is considering whether to raise the state pension age above 65 and, if so, whether that will happen before 2010, or after 2020?
Alan Johnson: I have saidmy predecessor said this, but I will say it againthat Government policy is not to insist that people have to wait until they are 70 before they draw their state pension. We will have the debate, but our view is that people should have the choice. We should offer the inducements in terms of the increment to the weekly pension and the lump sum of between £25,000 and £30,000. However, if we insisted that people had to wait until they were 70 before they got their state pension, many peoplewho had spent their lives in heavy industry, who are not as healthy and fit as the rest of us and who cannot look forward to the longevity that, as Turner pointed out, actuaries underestimated in the pastwould have short lives on their state pensions. The choice agenda may unite us in consensus. It is important not to introduce a level of compulsion in the age at which one draws the state pension.
Kali Mountford: Choice is better made when informed. Given the announcement that my right hon. Friend made at the Labour party conference, would he inform the House further on his ideas about how people can be better informed about the choices that they make and at a much earlier stage in their employment, so that their retirement can be comfortable?
Alan Johnson: I will come to my hon. Friend's point in a second. It is crucial to what will be the major aspect of the second report from the commission, which is whether there should be compulsion. Informed choice is important to that.
We believe that there is real potentialin fact, I come to my hon. Friend's point straight awayin revitalising the voluntary private approach. The newspapers erroneously said last weekend that I had ruled out compulsion in respect of whether to contribute to private pensions. I did no such thing; I have an open mind on the issue. I will wait for the Turner commission report. However, it would be strange to move to compulsion without properly exploring the voluntary private approach. It must be right to consider that further.
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To that end, we are already pursuing policies that seek to restore confidence in private pension saving, create greater incentives for people to save and activate people to take advantage of the provision that is already there, making decisions based on clear, tailored information. The informed choice agenda and trying to wipe away the complexity that Adair Turner rightly identified as inherent in our pension system are issues that we must approach.
I would like to finish by saying a few words about each of those three aims: restoring confidence, creating greater incentives for people to save and activating people to take advantage of the provision that is already there.
Mr. Quentin Davies: The Secretary of State has said that he likes to try to give straight answers to straight questions. He also promised to answer before he sat down the question that I asked him earlier about whether he agrees with the Minister for Pensions that the pension credit is a short to medium-term solution.
Alan Johnson: I try to give straight answers to straight questions, but that does not mean that I always succeed. My view, which I mentioned earlier, is that the pension credit and means-testing should be there until we have solved the problem of abject pensioner poverty. It should not be the only part of our solution and divorced from a decent basic state pension, but it must remain a part of it. My hon. Friend the Minister for Pensions rightly asked, as Adair Turner asks in his report, whether we are planning to continue the policy indefinitely. I can say that there are no such plans to continue it indefinitely, but it has a role to play. I do not think that it has solved the problem of pension poverty yet. That is why we need to do more.
I return to the three aims that I mentioned earlier. First, it is critical that pensions are secure and it is crucial that they represent good value. Having cleared up the mess of mis-selling that we inherited, we went on to develop a groundbreaking approach to bringing security to members of final salary schemes who were losing their pensions when their company became insolvent and their pension scheme was wound up. I refer to the pension protection fund.
Next we had to act to protect employees whose accrued rights had been cut while working for solvent employers by introducing full buy-out regulations so that trustees can require a solvent employer who wants to wind up their pension scheme to buy out members' rights in full. We also need to implement the new Sandler pensions, which can be bought without expensive advice and with fees cut by one third compared with the old personal pensions. These and other changes in the Pensions Bill, which is currently in the other place, are crucial contributions to the pensions challenge. They will make a real difference, both now and in the future, to restoring confidence in pension saving and ensuring that pensions are secure and represent good value.
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