Pensions Bill

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Mr. Webb: The Minister would put my mind at rest if he put on record an assurance that no worker will, through the new clause, lose a right that would have any value to them once the new Finance Bill is in force.

Malcolm Wicks: Yes, I can do that, because a greater range of opportunities will now be open to that worker. The provisions are about recognising the logic of having more choice. We—not only the regulator but the protection fund, in the case of final salary schemes—are imposing new obligations on schemes, but there does not have to be an obligation on employers to remove choice. The new clause is about deregulating, as, in a sense, we bring in new regulatory powers. It is part of that balance. I hope that that reassures the hon. Gentleman.

Amendment agreed to.

Malcolm Wicks: I beg to move amendment No. 569, in

    schedule 12, page 233, line 18, at end insert—

    'In section 131(b), the words ''payable at any earlier time or''.'.

The Chairman: With this it will be convenient to discuss the following:

Government new clause 33—Increase in age at which short service benefit must be payable.

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Malcolm Wicks: The amendment and the new clause amend certain provisions in sections 71 and 72 of the Pension Schemes Act 1993 in respect of short service benefits. Section 71 of that Act provides that where a member of an occupational pension scheme has become a deferred member, but has at least two years' qualifying service in that scheme, or has transferred rights under a personal pension, his rights must be preserved as short service benefits.

Section 71 of the 1993 Act provided that where a scheme's normal pension age is less than 60, short service benefits more commonly referred to as deferred pension are payable no later than age 60. Section 71 applies to a limited number of schemes in which retirement before the age of 60 is expected because of the nature of the work; schemes for firefighters and police officers are the obvious example.

We made the proposal because when a person leaves such employment before normal pension age—say, if someone was a firefighter or police officer for just a few years early on in their career—we believe that the link with the normal pension age and employment is broken, so there is no reason why that pension should need to be paid early. The purpose of the new clause is to amend section 71(3) of the prior Act to change the latest age from which a deferred pension is payable in schemes with an early normal pension age. The age is increased to 65, which is in line with the general public policy of extending working life and raising the public service pension age in respect of future service. The new clause also adds a new subsection to section 72 to reflect the amendment to section 71(3) in respect of normal pension age. I emphasise the word ''future,'' because we are talking about future rights; the change does not touch past rights. I hope that hon. Members will accept the amendment.

Mr. Waterson: I appreciate, as the Minister pointed out, that the new clause and the amendment are to do with deferred pensions, so we are dealing with a fairly narrow issue. However, it is important to look at that issue in the broader context, particularly the public policy context that the Minister touched on.

We are talking about people in public service jobs, such as firefighters, police and others, who are used to a system where the norm is to retire at 60 or even earlier. The changes will take away something from them that they might otherwise expect to have. The Minister may present the changes as a tidying-up exercise—in the same way as the EU constitution, on a different level, has been presented—but that is clearly not the case if we put the changes in context. The briefing note is very up front and ''in yer face'' about this. It says that there is no reason to provide for a pension before what is the normal pension age for the public services generally. I will not be unique in having received several letters from constituents about the Government's plans for local government pensions, including those for policemen, firefighters and so on.

The proposals from the Deputy Prime Minister are to make the retirement age 65 for all by phasing out the ability to retire at 60 with 25 years service, to increase the earliest age at which benefits may be paid, other than on the grounds of ill health, from 50 to 55,

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and to introduce measures to provide for flexible retirement. It has been said—I think this is what the Minister was saying—that whatever changes are made will not affect pension benefits already earned from past service. However, as I understand the new clause, that is precisely what is being done, because people will have to wait longer to take that deferred pension.

One should consider the issue in the context of what the Minister referred to as the policy aim. The briefing note says that rights accrued up to the coming into force of the new clause are payable from an age no later than age 60, but rights accrued from the coming into force of the new clause will be payable from age no later than 65. Therefore, any rights accrued up to the time that the new clause comes into effect will be protected, but from then on things will be different for pensioners who have deferred.

It is important to probe the Government on what their policy really is. They have clearly taken the view across the board that people should be working longer before drawing their pensions. There is a significant feeling, certainly among my constituents, that that is unfair because the goalposts are being moved, and the new clause is just one aspect of moving them. I appreciate that the broad policy issue is for a different Department—the Office of the Deputy Prime Minister, and we would not want to cross such a redoubtable figure—but there is already a lot of aggravation from unions and individuals about changes to local government pension schemes. The new clause is just one aspect of that.

Since the Minister touched on the public policy view that people should work longer and be older before they draw their pensions, it is important that he sets out the thinking behind that. Is it simply a matter of saving money? Is it thought to be good for them? Does it tie in with a possible agenda for raising the retirement age to 70 or even higher? Those are all interesting issues that arise out of the provision, which, I accept, deals with the narrow question of the deferred pensioners.

3 pm

Mr. Webb: Again, I am trying to get my head round a new clause—this time it is new clause 33. I think the Minister implied that short service could mean 40 years. It means just short of being a current member of a scheme. In that context, short refers to any accrued pension rights where one has left the scheme before normal pension age. Will the Minister clarify whether we are talking in some cases about someone's practically complete pension rights—provided that they have left the scheme before normal pension age? I am not sure whether piddling is parliamentary language, but the amount of pension would not be negligible. We are not talking about someone's little bit of pension; we could be talking about someone's almost total pension.

The hon. Member for Eastbourne mentioned ill health grounds. Schemes may have different provisions for early retirement because of ill health. How will those interact with new clause 33? If someone has an earlier normal pension age for early

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retirement, will they still have to wait until they are 65, for example, before they draw the ill health pension?

I am also slightly hazy—perhaps because it is after lunch—about whether the provision affects accrued rights. The excerpts from the briefing note about existing and future rights that the hon. Member for Eastbourne quoted are in the context of exceptional schemes that have different rules for early leavers and for people who carry on until normal pension age. The note therefore implies that the excerpts he read out would not normally apply.

From the enactment of the legislation, will we end up saying to someone who has left a scheme, ''We have passed the Pensions Act so the money that you have built up and thought you would get at 60, you will actually get at 65''? Or are we saying, ''No, you thought that you would get it at 60, so you can have it at 60, but if you leave any scheme after the coming into force of the Act, then you will have to wait''? Will they receive the amount that had accrued up to the legislation's enactment? If one were to leave the scheme a year later, would one have to wait for the amount accrued up to enactment or just the amount accrued after enactment?

You can see my confusion, Mr. Griffiths. I am not sure which rule applies in which circumstances. If one has to carve up parts of pensions into parts that accrued before and after a date, and one has to draw one part at one age and another at another age, we will end up in the mire of complexity that so many of us wanted to avoid.

The other substantive issue is the Government's understandable drive to encourage everyone to work longer. The new clause would make it more difficult for people to draw pensions in their late 50s and early 60s. The Secretary of State borrowed what I always consider to be my phrase—perhaps I got it from someone else—about the cliff edge of retirement. If we are to regard retirement as a process rather than an event, does that process have to begin at 65?

If we want people to phase themselves out of the labour market much more slowly and less dramatically, why not think of a decade of retirement that might start at 60 and end at 70, for example, in which people could draw pensions that, if taken at 61, by definition would be more modest? They could combine it with part-time work throughout their 60s. Would that not be in keeping with the spirit of the Government's proposals? They would not suddenly stop working at 65. The new clause stops them from doing that, however. It says, ''You must work full-pelt until 65 because you cannot have your pension, then at 65 you get your hefty pension because you have had to wait, at which point you do not have to work at all.'' That does not seem to go with the grain of the Government's rhetoric about phased and staged retirement, and process not event.

One can understand that the Government want everyone to take their pensions later, but how consistent is that with the wider goal of this policy? This new clause has also been introduced very late in

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the day, and it might have some quite serious practical implications. Does the Minister know how many people it will affect? If it involves policemen and firefighters, that would represent a lot of people, although I am confused about whether it covers ex-policemen who have not yet reached pension age.

Are we, to borrow the phrase used by the hon. Member for Eastbourne, in footballers and ballet dancers territory? Almost by definition, footballers will leave the employment of their sponsoring employer before normal pension age. Should not people who have a burst when they can do their job and then a long period when they cannot, be able to smooth their incomes much more, rather than having a huge amount of money at one period in their life, followed by a barren period, and then having—under the new clause—to wait even longer before they can get the deferred pay that is their pension?

The new clause raises many issues. It is disturbing that it has come as late in the proceedings as it has. We need much more discussion than we have had so far. I hope—I think that this is important—that the Minister will take us through the issue of accrued rights to the date that the Act comes into force and of people who leave schemes subsequent to that date. Will their whole pension be denied them until they are 65 or only the bit that has accrued? On all of those things, we need to have a much clearer account.

 
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