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Dr. Nick Palmer (Broxtowe) (Lab): If the previous two contributions from the Conservative Benches reflect a wish to take politics out of pensions, I would not like to see the Opposition in partisan mode.
One thing that has not been said yet is that we should give credit to Adair Turner, as well as to the Government, for the degree of consensus that has been achieved. Despite all the criticisms that we have heard today, they focused on the detailed implementation of the scheme, but a couple of years ago I would not have put money on our achieving any consensus on the structure at all. It is worth recording that before moving on.
I should like to make three points. The first is about the issue that has preoccupied many hon. Members who have spokenthe interaction with pension credit, housing benefit and council tax benefit. We are all familiar with the arguments about means-testing in general. There will always be a trade-off between spreading whatever money we have thinly and concentrating it on the people most in need, with the risk of creating a trap if they then receive additional income. That is a long-standing issue. It is not trivial and it will reappear in other contexts. However, we should be clear that all such devices are designed as a safety net. Nobody sensible aspires to ending up on housing benefit and council tax benefit, which are there in case things go wrong in peoples lives.
A constituent once told me that it was not fair that she contributed so much in tax to the national health service, because she had never been in hospital. I told her that it was good news that she had not been in hospital and that the NHS was there as a back-up in case of bad news. We do not tell people considering signing a personal account that a huge profit is guaranteed at the end of their lives; rather, we say that if their careers follow a normal patterneven a low-earning patternand they contribute over their lifetimes, the probability is that they will be glad that they did so. However, if things go horribly wrong, either in peoples investments or their personal lives, that safety net is there.
That is a reasonable package, although I appreciate that there are issues for people who are close to retirement when the scheme comes in. In the interests of securing a high take-up for the scheme, we should try to address the concerns that have been expressed today.
Mr. Gregory Campbell (East Londonderry) (DUP): The hon. Gentleman talks about the safety net and I take his point on board. He refers to our telling vulnerable groupswomen, low earners and people in part-time employmentthat the safety net is there, but does he not understand that, for various reasons, those people do not listen whenever we say such things? All our cogent and logical arguments are lost on many people, for an abundance of reasons that we all understand. Therefore, however logically we put the case, many tens of thousands of people will miss it.
That is right, which is one of the arguments for the opt-in. We believe that there is a logical and serious case, which many people for whatever reason do not take on board, so it is reasonable to make it the default position that they become part of the national
pension scheme, rather than staying outside because of misplaced or other fears and just hoping for the best. However, as I was saying before the hon. Gentlemans intervention, we need to do what we can to reassure people on those points.
The second issue that I should like to raise is employer evasion. We are making the scheme compulsory for employers, but we are all aware that some employers will, for good or less good reasons, seek to minimise the number of employees for whom they pay a 3 per cent. contribution. As I mentioned in an intervention on the Secretary of State, it seems reasonable to ask in Committee why employers are being given a financial incentive to encourage their employees to opt out. Why should not every employee be part of the national scheme? The optional element would be paying the 4 per cent. and receiving the 1 per cent. tax rebate; the 3 per cent. would be paid by employers regardless. From the employers point of view, the issue would be entirely neutral. They would not be concerned about whether or not people signed upthat would be a matter for the people concernedand there would be no risk of the wink and nudge influencing people. I agree with the hon. Member for Beverley and Holderness (Mr. Stuart): employers will have a sheaf of forms to offer employees asking them whether they want to be part of the scheme, and the less good employers will nudge them in a way that is impossible to prove or to catch.
I am pleased, as I know my trade union colleagues will be, that agency workers are covered by the proposals in what I consider quite an elegant way, but there remains the problem of self-employed workers. We all know of the increasing tendency for some companies to farm out important elements of their operations to people who are at least nominally self-employed, and we do not want to reinforce that tendency by giving an additional incentive for the establishment of such arrangements. However, it would be helpful if there were ways of bringing self-employed people into the scheme.
My hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) referred to the Swedish yellow envelope scheme. In todays debate, we have still subliminally accepted the traditional model according to which people spend most of their lives working for one employer, but that is now very much the exception. The norm is that during their lives people work for a number of employers, perhaps a dozen or more, experiencing voluntary or involuntary interruptions in their employment. In such circumstances, it is easy for people to lose track of their pension rights. The attraction of the Swedish scheme, as I understand it, is that people receive annual statements providing an overview of their position.
I appreciate the Secretary of States point that in the absence of a defined benefit scheme it is not possible to tell people that, in the present circumstances, they will receive X pounds a week. However, they can be told Here is an overview of what we have on record for the pension schemes to which you have contributed so far, and a statement of the current assumptions of what that could lead to, with all the usual provisos issued by pensions firms; only the Government, or a Government-appointed agency, could do that.
It would be a real, visible, concrete service to British citizens if, as part of the package of being British, they received a statement from the British Government every year telling them where they stood in terms of pension provision. I think that it would stimulate saving without imposing an administrative burden on pension funds. They have to collect the information anyway; it is just a matter of passing it on. I believe that this is something we could do to help people make sense of the complex world of personal financewhich, up to now, many have struggled to do.
Steve Webb (Northavon) (LD): I shall focus on just one issue in my brief speech. I shall return to where the Secretary of State beganthe issue of womens pensions, which has been touched on throughout the debate.
I want to be helpful to the Government for two reasons. I thank the Secretary of State and, through him, his officials for the constructive dialogue in which I have been able to engage with him in recent months on a range of matters related to womens pensions, and for the efforts that he is now making to help resolve some of the technical problems connected with home responsibilities protection. I thank him and his officials for their constructive approach. However, he has, with due deference to the noble lady, what might be called the Baroness Hollis problem. Last summer, the Government were defeated in another place in the attempt to do something about the 2010 pension changes and the issue of women who retire before 2010 on a much less generous state pension regime. Baroness Hollis came up with one suggestion that the Government said they would do something about. They looked at it and have said that they will not do something about it. I want to offer the Government a way out and to offer my solution to the Baroness Hollis problem. I do so in a constructive spirit and, as the Minister knows, I will be happy to speak to him at great length about it if he wants.
After the announcement in the Lords that no progress was going to be made on the issue, Jackie Ashley wrote a column in The Guardian on Christmas eve describing what a problem this was. As I had nothing else to do on Christmas eve, I wrote to The Guardian and my letter was published a few days later. I pointed out that there were a set of women with gaps in their national insurance record who could do something about it now if only they knew about it. Interestingly, I read The Guardian letters column a few days later and found that a citizens advice bureau manager had written to say that I was rightit was a good letter, obviously. She said that even she had no idea that people could fill their national insurance record gaps on those special terms because the system was so complicated.
Baroness Hollis is trying to address the problem arising from the fact that many women are approaching, or have passed, pension age, have gaps in the national insurance record and could fill them, but have not done so. We need to use the existing mechanisms to enable women to fill those gaps.
As the Secretary of State said at the start of the debate, womenwe are principally talking about womencan fill up to 12 years of contributions gaps now. We
are in 2008, and one can pay back for any of the last six years, which takes us back to 2002. Between 1996 and 2002, there was a different mess; the Government were not telling people about such gaps in the national insurance record. To make up for that mess, there is a special scheme that allows people to pay back from 1996 to 2002. The problem is that lots of people do not know about it. I have set myself the goal of trying to find them individually. This might be slightly adventurous and I would like to enlist the Ministers help in the process. I have found a few so far, but there are a few still to go.
My serious point is this: the Government hold records on everybodys national insurance, so they hold records on all of those women who have gaps in their records for the years for which the special scheme applies and since then. If those women knew that they were entitled to fill the gaps in their record on these very favourable terms, many would do so. I have found dozens of such women who, when we have told them about the scheme, have found they could get, literally, free money. They have found out that they could pay a couple of thousand pounds in back contributions and earn £3,000, £4,000 or £5,000 in back pension. The scheme is so generous that the Government do not even ask them for the money and simply pay the difference.
I have had the pleasure of ringing up women the length and breadth of BritainI have had several proposals of marriageand helping them to discover that they could have free cash and a bigger pension. The problem is that the Government know exactly who they all are. They never told one set of women and they told another set but only once, several years ago, and in a somewhat complicated way. All those women have that latent entitlement that they are not taking up. The Baroness Hollis problemthe problem of lots of women with incomplete records who could fill themcould be made much better if the Government were to access their own records proactively and contact the women who are missing out.
Very briefly I shall identify the two groups about whom I am most concerned. The first are the women who did not get a letter from the Government telling them about gaps in their record. Such women are perhaps atypical now but are typical of a generation of women who left school at 15, worked full-time and paid some national insurance, left work to have children, went back for a period and paid the married womans stamp, but perhaps stopped altogether when they had other children. They might work in Oxfam, or they might care for an elderly relative. Basically, their working lives stopped in 1980. In other words, they have a dirty great gap in their contribution record.
A few years ago, the Government took the view that they would not tell these women that they were entitled to fill the gaps in their record on very favourable terms. The scheme is brilliant and the Government know all the women who are entitled to it, but they chose not to tell them; they did not write to them. This set of women could benefit if the Government used their own information to tell them. I am not asking for legislative change. All the information and powers are there and the Government just need to tell the women. Even if the Government were simply to prioritise those who have most to benefit from the scheme, that could help a
lot of the women whom Baroness Hollis is concerned about to get better pensions.
The second group is the women the Government did write to in 2004-05. Some of them responded, but, even on the Governments own figures, tens of thousands have still yet to respond. There is a ticking time-bomb in that there is a deadline, as the Minister well knows; the scheme will run out by 2009 or 2010. There are lots of women out there who could take advantage of it. I find them practically every daythe Minister looks mildly sceptical, but I can give him names and addresses. Practically every day I find another woman who could take advantage of the scheme and who received the initial letter and either did not understand it or, crucially, received it at a time when it was not right for them to respond. They might have been 60 when they received it and they did not have the £2,000 but they are now 64 and it is worth their while to respond, as they will get the offset and they will end up in cash. So it was right for them not to respond when they received the letter, but I would bet any money that they binned the letter because they thought, I havent got thousands of pounds, instead of putting it in an envelope marked, Open again in 2008 when it is worth while. The Government know who those people are.
There are a lot of women of the type whom the noble Baroness is rightly concerned aboutas is the Minister, and as am Iand whom the Government could help without a massive spending commitment. Of course, some money would be involved.
The critical point is that the Government know who these people are; they have their records. Even if they identify only those who could most benefit from the existing schemes, they would do a huge amount to address the concern that is felt in all parts of the House about women who have incomplete records, often because they have done something that was very worth while which has not been reflected in their pension benefit.
Ms Sally Keeble (Northampton, North) (Lab): I also want to pay tribute to Front-Bench Members for their outstanding work in tackling pensioner poverty, and in particular in dealing with issues to do with womens pensions. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) said to me earlier that there are many men in the low-income pensioners pot as well, which is of course right, but the figures show that the pensioners who are in poverty and who particularly miss out are overwhelmingly women.
The Government have done two particular things to help them. One is the much-reviled means-tested benefits, especially pension credit and the minimum income guarantee; many of those payments have gone to women pensioners and have been responsible for lifting them out of poverty. The other was to commission the Turner report, which produced excellent proposals on womens pensions. It highlighted two issues. First, it identified
that one of the main reasons why women pensioners were poor was that they were not qualified for the state pension. In the last round of legislation, that was addressed by reducing the number of years needed to qualify. In addition, there is, of course, the changing demographic profile and the change in womens status which means that more of us now work for longer. As a result, by 2025 more than 90 per cent. of us will be entitled to a full state pension. That is a major plank in getting women pensioners out of poverty.
The second particular cause of pensioner poverty for women that the Turner report identified was the fact that many women do not have pensions linked to their workin the past, the term for that was occupational pensions. The Bill is particularly important as it will bring in the mechanism that will give womenespecially those on low incomespensions that are linked to their work. That obviously raises a lot of issues, which I want to discuss. It will impact on their ability to get means-tested benefits, which have kept up womens income in retirement. However, it is right that we say that there will have to be a fundamental shift in pension provision such that people start to save even if they are on a low income. That will mean that people will have to start looking at saving, which will be the ultimate way in which they will achieve security in retirement.
Members have talked about incentives to save, and as I know from personal experience, the best incentive is to say to people, You put so much in the kitty and your employer will have to put in so much, and the Government will put in so much. That is a basic incentive to save. I speak as one of those women who missed out on their state pension, for all the reasons that the hon. Member for Northavon (Steve Webb) identified.
I want to touch briefly on three of the various issues relating to personal accounts, which I hope Ministers will look at. It is important that personal accounts work for people on low incomes who have never saved for their retirement before, particularly women. I understand from looking at the figures that people will get the full benefit of personal accounts only if they have their basic entitlement to a state pension; it is not a requirementit is just the way that the figures work out. That is why it is particularly important that in paving the way for this provision we ensure that pensioners can buy back missing years. I take the point made by the hon. Member for Northavon about the schemes that are open; when people get such lettersI get themthey think, Ill worry about that later. It is important that the issue be dealt with so that women can buy back the missing years from the early years of their employment, which are often the years that they miss. They also need to be able to buy back enough of the years to ensure that, if they have the means, if it suits them and if they think it the right thing to do, they get the full state pension. I will not go into the figures in detail now because my time is limited.
Secondly, the provision must work for women who have more than one job. Women in my constituency who have always worked and have a record of being in paid employment will often make up their income package through a basket of different jobs, all of them quite small and some of them not very well paid. It is
particularly important that those women also get the full benefits of the personal accounts, which perhaps means some tweaking of the requirements.
Thirdly, perhaps women should be able to vary the amounts that they pay into personal accounts, so that they can buy back years when they were unable to pay in as much. Womens employment goes in peaks and troughsoften troughs. When one occasionally hits the grassy uplands of having some money, it is very important to be able to make provision for ones retirement, particularly given that, as we know from research, women, when there is choice between their pension and their children, have a tendency to ensure that their children get the money. We therefore need to ensure that the patterns of how women save and work are properly reflected in the structure of the personal accounts. It is particularly important that these accounts perform the miracle of getting people who do not have a track record of saving to save not for a rainy day, for a holiday or for their children, but for their retirement.
We must also make sure that while this is going on, other elements of what the Government are doing do not damage womens pensions. Let me give an example. A constituent came to see meshe is between 60 and 65 and her husband is over 65to explain that the tax on her quite measly pensions is doubling. She is losing the 10p starting rate, which is going up, and she will not get the benefit of the increased personal tax allowance for pensioners. So whereas this year she is paying, as it says in a letter that I wrote to the Treasury, a total of £132 in tax, next year she will pay £261.40 on her pension income of £6,545.20.
I ask that while we do all this good stuff through the Department for Work and Pensions and this legislation to bolster womens savings, we ensure that other bits of Government policy do not penalise women because of differences in retirement age and such like. It is not enough to say that the husband gets the benefit, because the argument about womens pensions is about poverty and equity. Women expect to be treated as individuals when they have retired as well as when they are employed. With those caveats, I welcome the Bill. I hope that we can fine-tune those small bits in Committee to make it work for women.
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