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Standing Committee Debates
Pensions Bill

Pensions Bill

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Standing Committee B

Thursday 18 March 2004

(Morning)

[Mr. Win Griffiths in the Chair]

Pensions Bill

New clause 5

State pension rights of women with a

record of reduced rate contributions

    '(1) The Secretary of State shall compile a list of all women whose record of National Insurance Contributions includes one or more years in which they paid contributions at the reduced rate for married women (''the list'').

    (2) The Secretary of State shall write to all women on the list with a forecast of their state pension entitlements.

    (3) Women on the list shall be entitled to make additional National Insurance Contributions in respect of any year in which they held an election for reduced rate contributions but did not make any such contributions.

    (4) Any contribution made under subsection (3) may be taken into account only for the purposes of state retirement pension or bereavement benefits.

    (5) The Secretary of State shall require the Government Actuary

    (a) to report to him, within six months of the coming into force of this Act, on the operation of the system of reduced rate contributions for married women, and

    (b) to make make recommendations as to any redress that might be made in respect of women on the list.'.—[Mr. Webb.]

Brought up, and read the First time.

9.30 am

Mr. Steve Webb (Northavon) (LD): I beg to move, That the clause be read a Second time.

Good morning, Mr. Griffiths. We are a select band, but quality makes up for lack of quantity. The purpose of new clause 5 is to address the needs of women who, at some point in their contribution history, have paid national insurance at the reduced rate that is available only to married women and subsequently if they are widowed.

The Committee might say that the Bill is mainly about company pensions, private pensions and regulators, so why spend time on a new clause about a specific group of people and their state pension entitlement? My reason for tabling the new clause is that the Government accepted in their pensions Green Paper that women's pensions were a particular issue and devoted a whole chapter to the nature of the problems that affect women. We had assumed that, when the Department for Work and Pensions had time, it would introduce legislation about women's pensions. However, the Pensions Bill is pretty much silent on the subject. The new clause would tackle one of the injustices that women face, which is why they continue to be poor relations in the matter of pensions.

In the constructive spirit of the Committee's proceedings, I refer hon. Members to early-day motion 131 that was tabled in the previous Session. It is almost the same as new clause 5 and was signed by more than 200 hon. Members. As well as myself, my hon. Friend the Member for Chesterfield (Paul

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Holmes) and the hon. Member for East Carmarthen and Dinefwr (Adam Price), four Labour members of the Committee kindly signed the early-day motion. They were the hon. and learned Member for Redcar (Vera Baird), a co-sponsor of the motion, and the hon. Members for Coventry, South (Mr. Cunningham), for Burton (Mrs. Dean) and for Monmouth (Mr. Edwards). I am grateful to them for signing an early-day motion that was headed by the name of a Liberal Democrat, although it was a cross-party motion, because they strongly felt that an injustice needed addressing. I hope that the Committee will consider that the issue is not partisan but unites us all.

I shall set out the background to the problem. Under the system, married women could elect to pay a reduced rate of national insurance. In return, they forwent entitlement to retirement pension and certain other benefits on their contributions. Why have such a system in the first place? Well, as the Minister will know, it was based a male breadwinner view of the world. The presumption was that men earned money and that women had babies, so only men needed their earnings replacing and would therefore be part of the system and pay the full rate of national insurance, but married women—as distinct from single women, who were never part of the scheme—could pay less and receive less. In a 1940s view of the world, there was a certain logic to that idea.

In principle, we could ask what was the problem. We had a system under which people made an informed choice. They saved money at the time and recognised that, when they were old, they would not receive it, but they would have husbands. Had that worked, we would probably not be here discussing such matters, but the truth is different. There are several respects in which, in fact, the choice that the women made when they opted for the reduced-rate contribution was not an informed choice in the way that we understand that term now. [Interruption.]

The Chairman: Order. I remind hon. Members to turn off their mobile phones, their pagers and any other instrument that might disrupt the sitting.

Mr. Webb: Thank you, Mr. Griffiths. When women opted for the reduced rate, was it a free, informed choice of the sort that happens today in pensions? The Government's line has always been that, to be entitled to the reduced rate, women signed a form. The form stated, ''I have read and understood the leaflet''. We would assume therefore that that was the end of the story. But there are several examples of that not happening. I know that because when I first raised the issue in the House—I have since raised it regularly over the past seven years—I was contacted by angry women from throughout Britain who have formed themselves into a campaigning organisation, Support Women Against Pensions Poverty, or SWAPP for short. The organisation now has a network of more than 1,000 members, all of whom are aggrieved at the way in which the married woman's stamp has treated them. They are the tip of the iceberg. Every time we raise this issue in public we get more letters saying that the system was not fair.

Let me explain what I mean. First, I am not saying that nobody understood. Sometimes when I make

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these arguments a straw man is set up in response. It is quite clear that some people signed the form, read the leaflet and made an informed choice to save some money now and do without a pension later. However, it is also clear that that is not true for many women. To give an example, we are talking typically about the '60s and '70s. The culture was different then. Often women married very young, so many of the women who switched over to the married woman's rate were teenagers or in their early 20s. One woman who wrote a letter to me explained that she came back from her honeymoon, at the age of about 19, and the man from payroll came round and said, ''Did you have a nice honeymoon, love? Sign here. You're a married woman. You pay the married woman's rate.''

Most people, even today, do not really understand how national insurance works. Certainly back then many did not. People report that, although they signed the form, they were not shown the explanatory leaflet and were simply told that that was the way in which the system worked. There are many examples. The woman I referred to said that the payroll man used to be in the Army and people do not argue with a brigadier. That is a world away from the informed pensions choice that this Bill is about. However, that is what happened. Unless the Government think that all those women are liars—I have 1,000 letters in my office from women making such points—they have to accept that what the women describe happened. Some women signed the form because they were told to; things were not explained to them.

Before some women signed the form, they asked for information and advice. They rang up the then Department of Health and Social Security—or whatever it was called at the time—and quite often they were given duff advice. Can they prove it? Well, of course they cannot: it was a phone call that took place 30 years ago. They cannot prove it, but I am convinced that it happened. They would ring up and they would be told, ''You don't need to pay national insurance, love, because you'll get a pension off your husband.'' It is true that when their husband reaches state pension age, they are entitled to a 60 per cent. pension on his contributions. However, what was seldom, if ever, explained to them was that they do not get a penny until their husband hits 65.

Significantly, given that the women's state pension age is 60, when a woman who is the same age as her husband hits 60, she gets nothing at all for five years. A departmental officer who explained that, ''You don't need to save for a pension, love,''—that is probably how it would have been put—''because you'll get something off your husband,'' would have been giving a misleading impression if they did not go on to say, ''But only when he is 65.'' One poor lady is 20 years older than her husband. Frankly, she will be dead before she gets any pension on his contributions. Obviously a whole range of women are involved. Some will be younger than their husbands, so the issue will not arise. However, this is another example of the lack of good information at the time leading to an injustice.

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If what happened then happened today, there would be compensation claims, ombudsmen and all sorts of things, but we are talking about a different world. One problem is that it is only now, as they approach pension age, that people are finding out about the past and the consequences involved. One reason why the first two subsections of the new clause 5 provide that the Secretary of State shall compile a list of women who paid the married woman's stamp and write to them all—that is very much in the spirit of the Bill, which is about giving people pensions information and forecasts—is that, even now, many women approach pension age and get a nasty shock. They hit 58 or 59, send off for a pension forecast and find that, in some cases, they are entitled to pennies.

When I made a television programme about this issue, hundreds of people wrote in. One of the women retired last summer with a pension entitlement of one penny. Most people do not believe that that can be the case. People simply do not understand. It therefore seems entirely reasonable for the Government to accept the first two subsections of my new clause, if they do not feel that they can accept the whole of it. I would regard it as serious progress simply to tell people. We are not talking about a marginal little bit of the system that affects a handful of people. Although it is true that now only tens of thousands of women are on the married woman's stamp, 4.5 million married women were paying it at its peak, and it has affected the future pension rights of the vast majority of those women.

I have not focused the new clause on the 80,000, 50,000 or however many are left on the married woman's stamp but on the fact that the Government Actuary estimates that even now well over 1 million married women whose contribution record was affected by it have not yet reached state pension age. That explains the purpose of the first two subsections of the new clause.

The third subsection is about filling the contribution gap. Once we have notified women that they are heading for a pathetic pension, we might want to allow them to do something about it, but again the law stops them. As I am not sure that the new clause is worded absolutely correctly for what I am trying to achieve, I shall explain my intent. People can pay class 3 voluntary national insurance. In some cases, contributions can be backdated several years to fill gaps in their national insurance contribution record, but married woman on the reduced stamp cannot make such payments for any year in which the married woman's election was in operation. I am sometimes accused of demanding something for nothing for those women, but that is not the case in subsection (3) of new clause 5, which asks the Government to accept payments from them.

A typical situation would be the woman who left school at 15—let us think about when this happened—worked immediately after school for, say, five or six years, and then married and went on to the married woman's stamp. She is only a few years short of getting at least a 25 per cent. pension in her own right. We might discuss the 10-year rule or the 25 per cent. rule at a later stage of the Bill, but, leaving that to one

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side, if those women were allowed under subsection (3) of new clause 5 to make additional contributions in order to fill gaps in their record, they would receive something for something.

I stress that I am not asking for something for nothing. A misunderstanding is that the women paid nothing. In fact, they paid a reduced rate that was far more than the value of the very limited benefits that they received; it was not an actuarially fair reduced rate. They paid about one-third the amount of national insurance—that was certainly the case when we went to earnings-related figures—but what they received was not remotely related to their contribution. We are not asking for something for nothing but something for something; for example, the chance to top up contributions. Subsection (4) clarifies that, because of the scope of the Bill, contributions should fill gaps in retirement pension records.

Subsection (5) is the critical and, perhaps, most controversial part of the new clause. It asks whether there is a bigger issue involved. Is there something that the Government Actuary should consider? I am absolutely convinced that there is, as the system has failed in several ways. I mentioned earlier that people made their initial decision when the literature and explanations were not very good. Lord Rooker, the Minister's predecessor but several as the Minister with responsibility for pensions, admitted in the House that the leaflets available at the time would not pass the plain English test. He went on to state:

    ''It was as if there was an ordinance that Departments did not give advice—they were not in the advice business. All we could say to constituents was, 'Make a claim and you will get a decision' ''—[Official Report, Westminster Hall, 23 May 2000; Vol. 350, c. 187WH.]

The culture was completely different then. Indeed, as one departmental official memorably put it recently, they did not have plain English in those days. That was the sort of world that existed.

As not all the Opposition Members were able to be here at the beginning of the sitting, I repeat that the hon. and learned Member for Redcar has actively promoted these arguments in the House, and other hon. Members have endorsed them. I hope that they will contribute to this debate.

9.45 am

Why should the Government Actuary launch an investigation, and what should it be about? A key point is that even if the women had made an informed choice at the time, the world and pension systems have moved on. What may have been the right choice then became the wrong choice later. I wish to give some examples. The classic one, as this discussion is about married women, involves home responsibilities protection. It was introduced in 1978 and said that a woman—the beneficiary was typically but not always a woman—drawing child benefit could have her pension record protected for the years in which she received child benefit through home responsibilities protection, but married women paying the married women's stamp were excluded from such protection. How many married women knew and understood that by not revoking their reduced-rate election they were potentially forgoing a decade of pension protection?

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One gets home responsibilities protection for every year of child benefit, so a woman who stayed at home with the kids for the whole time that they were at school would lose 16 years of pension protection. That could produce the following extraordinary situation. Let us say that two women lived next door to each other, both worked at the same factory and gave birth on the same day, but one paid the full stamp and one the reduced stamp. For the next five years, until their kids started school, both were at home. One woman paid no national insurance, but previously paid the full rate, and would get her pension right protected; the woman next door, who also paid no national insurance, would get no pension protection.

It might sound as though I am talking about the '60s and '70s, but there is a huge legacy in pensions that means that, even today, many married women retire with pathetic pension entitlement because of matters such as not being entitled to HRP. Those women who, pre-1978, elected for the reduced rate may have made the right decision, but they might have been well advised to opt back in later. Did the Government tell them? Not only did they lose home responsibilities protection, but they lost state earnings-related pension scheme entitlement. That did not exist pre-1978, so a woman who made that choice before then could not have known that she would exclude herself from it. Unless she followed the proceedings of the House, she would not have known a lot about SERPS and would probably not have known that she was excluding herself from it by continuing on the reduced rate.

There are other complications that it would be unreasonable to expect anyone to have understood about the choice. There was something called the half test, which applied—guess what?—only to married women. It said that married women, and only married women, had to build up half their working life in pension rights before they could get any pension. That rule was later scrapped.

Thus there will have been married women who were right, at the time that they opted for the married woman's stamp, because the half test would have terrified them. They would have thought that they would never work for half their ''working life'', and so paid the reduced stamp. Then the half test was abolished, but did anybody write to married women and tell them? If they had, the answer would have been, ''What's the half test?'' What I am trying to communicate is that it was a fiendishly complicated and evolving system. Women made choices decades ago that would have consequences for years to come in a culture that was completely different from today's.

The Minister was challenged by the hon. and learned Member for Redcar, or another Member, in the House on Monday at departmental questions on the issue. He gave two answers about why he rejected the general approach of doing anything for married women who paid the reduced stamp. The first was that it would not be fair to the women who paid the full stamp. That is a legitimate problem. As I said, when I produced a short television programme about the issue, I received hundreds of letters. Ninety-five per

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cent. were from women who paid the reduced stamp and would be covered by the new clause. Five per cent.—not a bad ratio for me, actually—was hate mail from women who had paid the full stamp and who knew what they were doing, who said, ''I knew what I was doing. I paid the money. I made the sacrifice. Why should they get something for nothing?'' Were I calling for something for nothing, they would be exactly right.

However, I am not saying in the new clause that we should pay full pensions to married women who have only ever paid the reduced stamp. I am saying, first, that they should be told, which seems reasonable; secondly, that they should be able to spend their own money topping up the contributions they made in the past; and thirdly, that the Government Actuary should consider—

 
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