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Another issue that has often been raised with me is not addressed in the Bill. Overlapping benefits and entitlement to mobility benefits affect pensioners generally and also carers, but the Bill is silent on them. I wish to discuss two particular points, one of which is pensioners’ rights to carer’s allowance, the entitlement to which currently ends at retirement. I hope that I am correct about the technical points on this matter, but if not, I am sure that my hon. Friend the Minister will put
me right. The withdrawal of that allowance means that pensioners caring for disabled spouses or for children do not get support for performing that caring role. The theory is that because carer’s allowance reimburses people for lost income as a result of their caring, it is not appropriate for pensioners. However, for people in that situation it appears simply that once they hit retirement age recognition of their caring role is lost—as is the fact that such caring is, indeed, work. I presume that when the state retirement age increases, the entitlement to carer’s allowance also increases, but I would appreciate clarification on that, and also on whether there might be any relaxation of the rules in respect of pensioners’ rights to access carer’s allowance. I have written on several occasions to the Department about the issue, which continues to be a source of considerable grievance to many of my constituents.
The second issue to consider is the ability of pensioners to get the mobility component of disability living allowance. Once people start receiving pensions they get attendance allowance rather than DLA. That restriction is bitterly opposed by my constituents. We enjoy greater longevity and have increased expectations of a good quality and standard of life when we are older; my constituents—in common with those of other Members—expect to remain mobile until they are much older than did previous generations. I visited a constituent at home shortly after she had had, at the age of just over 60, both of her legs amputated. She was refused any help to get mobile. She had been used to driving and had previously led a mobile and active life, but just because she was retired, she was told that she would not get as high a level of support as she might otherwise have received. That was difficult for her to accept. Will my hon. Friend the Minister say whether any further thought is being given to such support for pensioners?
On the entitlement of part-time workers to pensions, the reduction in hours worked for people to qualify for state pension is very welcome. As a result, many more women will be entitled to the state pension. Despite what the hon. Member for Runnymede and Weybridge (Mr. Hammond) said, it would have been wrong to have dramatically improved the value of the state pension when that would have left so many pensioners still in poverty simply because they are women and so they do not get the state pension at all. I look forward to the value of the state pension being increased once the proposed changes are in place. Those changes will also mean that more people—up to a total of 70 per cent. I think—are included in the state pension net.
There is still an outstanding issue related to the qualification of part-time workers. Many women in my constituency make up their working week by working a number of shifts for different employers—working flexibly to meet their family commitments and their financial needs. That has been of benefit to the local employment market and the local economy, as well as to local families. Some such women might work eight hours for one employer, eight hours for another and four for another, and yet they still might not qualify for a state pension. Will my hon. Friend the Minister look at the possibility of easing up on the rules so that more part-time workers are able to qualify for the state pension?
My final point, which overlaps with those made by several other Members, is to do with the provision of information and the personal accounts delivery authority, which the Bill will establish. I welcome that, and I regret the early efforts to undermine a new savings scheme for pensioners that should give people the cornerstone for independence in their retirement based on the savings that they have made during their working lives. That is the right way to proceed, and the loss of that linkage has been profoundly damaging to people’s security in retirement. It is also right that the scheme should be compulsory—which would mean, of course, that there would be auto-enrolment. But there is a caveat. In the past, people have asked me what sanctions might be imposed on those who do not make private provision. However, there must still be a secure safety net for people who are not able to, or who, for one reason or another, do not, make private provision. The Bill provides only for the outline establishment of the authority—the detail will come later—but I ask the Minister to comment on how the difficult issue of information and advice will be handled.
Every time that there has been a major problem with pensions, usually the heart of that problem has been to do with the provision of information—not merely the detailed advice on what people should get, but the basics of the information. The pensions mis-selling scandal, for which the Conservative party was responsible, was largely to do with Government advertising that encouraged people to take out private pensions. I remember an earlier debate in this House when those advertisements were waved around and their terms were read out. The widows’ state earnings related pension scheme debacle—constituents of mine provided one of the test cases considered by the ombudsman—also centred on the provision of information and whether people were given notification about the changes at the right time.
Recent problems with occupational pensions have also been caused by issues related to the provision of information. [Interruption.] Yes, I take on board the point that the hon. Member for Hemel Hempstead (Mike Penning) makes. One of the issues that got women into pension difficulties was the married women’s stamp and what information women were or were not given when they signed up to it. A steady stream of women have come to my advice surgery saying that when they signed up for it they did not understand that that meant they would not get their own proper pension. I have looked into that. Employers have provided forms that show that the women had the necessary information and that they ticked the boxes and signed the papers, but many women argue that they did not understand what they were doing when they signed for that stamp. In my first jobs, I had the married women’s stamp, and I know exactly how it felt to sign something and then later to find out that I had, to an extent, signed away my future.
Miss Begg:
In terms of the married women’s stamp, the problem was not that the advice from the Government was wrong; in fact, it was correct. The problem was to do with individuals’ understanding of that advice. My mother was told, “It doesn’t affect your pension”, but what those who told her that meant was, “It doesn’t affect the pension you will get through your husband”, which it did not. Therefore, advice might be correct, but someone’s understanding of that advice
might be flawed, so it can be argued that the Government cannot be held to account because someone did not understand the clear advice that the Government gave at the time.
Ms Keeble: I take on board that point, and I have had an argument about that each time I have raised this issue. None the less, what women will say is, “I didn’t get the advice.” What they heard and what they were told might be two completely different things, but the end result is that many women were left in poverty in retirement because what happened to them was unexpected and they had not made provision, whereas if they had thought things through—if things had been slightly different—they would have done so. Some of them say, “I could have paid it, but I didn’t because I thought I’d still get a pension; so things went wrong.” Things are different now, in that women earn more and their employment status has changed, but it is really important that we get it right this time.
Who will be responsible for providing not just detailed advice some way down the line, but the initial information: the employer, the new authority, the Government or the new national independent financial advice service that the Government heralded this week? What arrangements will be made to ensure that the information is comprehensible? One difficulty is that pensions is a very obscure and complex subject. With the best will in the world, it can be very hard to ensure that the information provided can be understood by the general public, as well as by the experts. We need to be sure that people know what is happening to their money and what choices they can make, and that they do not find 30 or 40 years down the line that they are paying the price of a badly worded leaflet, or of having been given some unclear information.
The Bill will go a very long way toward righting a wrong that has caused misery to many women in retirement. I have asked my hon. Friend the Minister for some assurances and further information, which I hope he will give, but as I understand it, 500,000 more women will get full-time state pensions as a result of this legislation. I hope that it will ensure that people make personal provision for their future security, mark the end of a long-running injustice that many women in my constituency have experienced, and provide them and their families with real security in old age.
6.32 pm
Sir John Butterfill (Bournemouth, West) (Con): I welcome a great deal of what is in the Bill, and I pay tribute to the extensive consultation that has taken place through Turner, discussion of the White Paper, the Select Committee and the all-party committees of this House. I pay particular tribute to the hon. Member for Birmingham, Selly Oak (Lynne Jones), whose all-party group on pensions consensus has contributed considerably to getting us where we are today. Having said all that, if I now say a few things that might be construed as slightly critical or ask awkward questions, I hope that I will not be accused of slagging off the Bill in the way that the hon. Member for Yeovil (Mr. Laws) did for nearly 45 minutes—only then to say that he was going to vote for it.
Personal accounts are a good idea for all sorts of reasons. At the end of the day, they will encourage a savings culture, and I hope that the idea will eventually be built on in the same way as in Australia, for example. However, it will not suffer from the disadvantage of the Australian system, which is entirely compulsory. There is an opt out for those who may be advised—one hopes that generic advice, at the very least, will indeed be provided—that it would not pay them to enter into the system. The Bill has that element of flexibility, but it creates a structure that can be built on for the future, and it might mean that a lot of people will eventually be a good deal better off in retirement than they would otherwise be. The initial figures are in fact very modest. The total sum is about 8 per cent. of pay, which will not provide anybody with a realistic pension during their lifetime, so they will still be dependent on state support. However, it is a start, and, as such, a good thing.
I am a little concerned about the possible impact on existing employer schemes. There is a danger that employers might trade down in terms of what they provide for their employees because of the existence of the new system, or that it might undermine the operation of some existing employer schemes. The personal accounts delivery authority will have to look at that issue very carefully.
The personal accounts delivery authority will have a considerable role in, and influence on, the scheme’s design, but it is not entirely clear from the Bill as published what the precise objectives will be. Will they, for example, be the same as the objectives set out in the White Paper? How will the authority deal with investment strategy, and will it deal with generic or other advice for employees? Going beyond that, can the Minister explain why it is proposed that the authority, having finished its work, will hand it all over to a personal accounts board? Why will all the expertise built up in the authority be scrapped and handed over to somebody completely different? There must be a case for considering whether the board—the successor body—is in fact a natural evolution of the authority.
Sir John Butterfill: The Minister seeks to intervene but if I may, I shall deal with another couple of points first. I will be very pleased to give way to him in a moment, so that he can answer these points.
As I was saying, an element of expertise will have been built up by PADA, as we may come to call it. One other thing that puzzles me about the current proposals is that it is not intended to involve the various stakeholders ab initio; for some reason, they will become involved a good deal later down the line. Surely it would be much better to involve them from the start, when we are looking at the scheme’s design, rather than leaving it till later on, when certain elements may have been set in stone. I now give way to the Minister.
James Purnell:
There will not be time at the end of the debate to reply to all the points made, so on this very important point, I want to reassure the hon. Gentleman now that he is absolutely right: one would
expect a large degree of continuity between the delivery authority and the personal accounts board. All that the Bill is doing is establishing that they will be differently legally constituted organisations with different responsibilities. It may not be that every single person carries on from one organisation to the other, but the hon. Gentleman makes the very good point that the expertise should be maintained and that stakeholders should be involved from the very start in developing policy. However, there should not necessarily be strict representation on the board of every stakeholder; otherwise, it might not be able to be as flexible as we would like.
Sir John Butterfill: I am very gratified by the Minister’s response; there could otherwise have been a lot of wastage of effort and expertise.
I have some concerns about the reforms to the second state pension. The earnings-related element is set to disappear. It was said earlier that that will not be unfair to above-average earners because they will get the same as everybody else, but they will surely be paying more, so at the end of the day they will be paying more for less; I do not see how that can be avoided. I am also concerned about the effect on defined-benefit schemes, which will suffer from the lower contracted-out rebate. They are already in some difficulty, and not everything that the Government have done to date has encouraged the companies that provide such schemes. The reforms will make life rather more difficult for them, which I would have thought was the last thing that the Government wished to do. At the same time, the take-home pay of their employees will be reduced. Those two things make that particular element of the second state pension reforms rather difficult to understand.
On guaranteed minimum pensions, I am delighted that the Government are getting rid of this extraordinarily complex and contentious regime. Employers have made many mistakes with GMP, and the advice given by lawyers has often been contradictory. I am sorry to say that the advice given by the National Insurance Contributions Office has also sometimes been wrong and contradictory. That even happened with the House of Commons scheme, the board for which I have the honour of chairing, so anything that reforms GMP will be a good thing. However, the initial reform proposals look extremely complicated, and I hope that they can be made as streamlined as possible. If we can in some way get rid of the whole thing in one fell swoop and remove the burden from employers, that would be welcomed by everybody I know in the pensions world. The situation on the abolition of contracting out for defined contribution schemes is different and, on balance, will probably be a good thing. It is the defined benefit schemes that I am worried about.
All the hon. Members who have spoken today have welcomed the return of the link to earnings of the state pension. It must be a good thing, but there is still some suspicion about when it will occur. As others have said, the promise is rather vague. Will it be 2012 or might it be 2015, or will it just disappear into the ether and never occur? The Bill does not contain a firm commitment to the establishment of the link.
We also need to know how average earnings will be calculated. We are told that it will be done by the Secretary of State, but how will he do that? Will a
detailed system of calculation be laid down in some annexe to the Bill? After all, calculations of average earnings by different experts all come out different.
Mark Pritchard: Does my hon. Friend agree that in order for trust in the Government on pensions to be rebuilt, the pledge to restore the link must change from an aspiration to a commitment, with a defined timetable? In that way, people can know ahead of the general election whether it is real or just another empty and false Labour promise.
Sir John Butterfill: My hon. Friend is right. It would reassure many people if we had more certainty on this issue. It would also reassure many people if the calculation of average earnings was done for the time being by some independent authority, rather than the Secretary of State. Otherwise, it would be open to future manipulation and we know that that has happened under Governments of all complexions. An independent calculation of average earnings would therefore reassure us all.
The Government have been a bit timid on changing the state pension age. I said that when the White Paper was published and when Turner made the proposal. It would be possible to compress the timescale proposed in the Bill, so that the changes would happen earlier. I know that the Government have said that the equalisation of pension ages between men and women is dictating the timetable, but I disagree. It would be possible to compress the timetable and achieve considerable additional savings by so doing, which could provide cash to abolish some of the means- testing that people are so concerned about—especially the Liberal Democrats. Their solution seems to be, “Well, the Government spend lots of money on everything else, so why not spend lots of money on this?” Liberal Democrats are prone to saying that, but if we compressed the timetable, we could find some money to help in getting rid of means testing.
The proposal is to wait until 2044 and 2046 to change retirement age to 68. Well, the US already has a retirement age of 67, as does Scandinavia. For us to wait almost another 40 years to make the change to 68 is very unambitious. If others can go faster, we should too, and there are great savings to be had by doing so. Indeed, with the improvements in medical science and the resulting increases in longevity, it may not be impossible to change the retirement age to 70.
John Penrose (Weston-super-Mare) (Con): My hon. Friend will of course be aware of the comments made by Lord Turner in his report to the effect that one has to give people a minimum length of time to complete the financial planning for their retirement. While it probably would be possible to compress the timescale in the way that he is describing, there is a cut-off point because after a certain stage in people’s working life they cannot alter their financial plans that much. There might be some scope for compression, but there would be a limit to it.
Sir John Butterfill: My hon. Friend is right, but the Government propose an extremely long timescale, which is much longer than that delivered in other countries. We should seek to be more ambitious than we are being at present.
Mr. Weir: The hon. Gentleman mentions longevity, but does he accept that one problem is the disparity in longevity between areas? It was recognised by Lord Turner to some extent, when he suggested that pension credit should apply at age 60 for some groups. Does the hon. Gentleman see any solution to the problem, given that he proposes accelerating the change to retirement age?
Sir John Butterfill: The hon. Gentleman is right to say that in parts of the United Kingdom, notably the one that he represents, longevity is not as good as it is elsewhere, but that is largely due to poorer health, with greater rates of smoking and unhealthy eating habits. Education is the major key to equalising longevity throughout the UK, because there is nothing inherently unhealthy about living in Scotland. Most medical opinion is of that view. However, I do understand that at present there are wide disparities.
Mr. Weir: There are also massive disparities in England. The same problems found in parts of urban Scotland are also found in parts of England and Wales, for historical reasons. It will take a long time before those disparities disappear.
Sir John Butterfill: I understand the hon. Gentleman’s point, but the medical profession and improved education can help. It is not an insuperable problem and I am not sure that we should be prevented from doing something that would benefit the nation as a whole—including a high proportion of the hon. Gentleman’s constituents—simply because of disparities in health outcomes.
Pension credit is a difficult problem. Even on the Government’s figures, one third of pensioners will still be claiming pension credit by 2050, and we need to do everything in our power to try to eliminate means- testing. It has a high administrative cost and we also need to restore dignity. Most of my constituents who claim benefit would much prefer not to have to do so and the elimination of means-tested benefits, wherever possible, should be an objective for both sides of the House. I have given one example of ways in which we might be able to save enough money to enable us to do that.
The Minister will recall from my Adjournment debate on 2 November that I am delighted that the Government are making changes to the home responsibilities protection provision. The changes will be good for parents and carers, and 20 hours a week is a reasonable requirement. The Minister will remember from my Adjournment debate that I am concerned about how the 20 hours will be defined. Who will provide certification? In many cases, the time spent by carers is difficult to measure. Perhaps we should require a medical practitioner to say that a particular patient needs at least 20 hours of care, as that would be preferable to requiring carers to prove that they provide 20 hours of care.
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