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Steve Webb (Northavon) (LD): The Minister mentioned that the price of class 3 has gone up from about £8 to about £12. Will she break down how much of that increase would have happened anyway as class 3 is now worth more because there are fewer qualifying years post-2010? How much of the increase is due to the revenue neutrality of the amendment? How much would the increase have been without Baroness Hollis’s amendment and how much of it is because of that amendment?
Ms Winterton: I am not entirely clear about how the division would occur. If I can find out further information, I shall write to the hon. Gentleman. The two have been put together in order to meet the requirements of the Baroness Hollis amendment, if we can call it that, and the changes to which he referred.
The proposals made by the hon. Member for Northavon (Steve Webb) would amend the Bill to permit a much larger group of pensioners to buy additional years. The costs of extending the rules by removing the 20-year de minimis for those reaching state pension age between April 2008 and 2015 would be at least £3 billion. If we were to take that back to 2004, the total cost would be about £5 billion. That cost would increase for every further year. The benefits gained by people living overseas with a limited connection to the UK would far outweigh the benefits to the women in the UK whom the hon. Gentleman is keen to help. That is why we cannot accept his amendments.
The remaining measures in the group are designed to help simplify our complex pension system. Let me start with state second pensions. The Pensions Act 2007 introduced measures to replace an incredibly complex structure with a much simpler flat-rate amount. The Bill goes a step further and contains measures to simplify the past by consolidating accruals to state second pensions. Amendments Nos. 171 to 176 and 241 to 246 achieve that. They also smooth the consolidation when it applies to those who have been contracted out prior to 1997 and clarify the status of work the Government Actuary will undertake to achieve that simplification.
Let me move on to contracted out pensions more generally. The Pensions Act 2007 contains provisions to abolish contracting out on a defined contribution basis and removes most of the rules concerning the use of protected rights already accrued at the point of abolition. Amendments Nos. 177, 215 and 284 complete that work by removing the survivor benefit rule so that once contracting out on a defined contribution basis ceases there will be no requirements on individuals regarding past protected rights.
Amendments Nos. 152 and 279 remove unnecessary provisions in the Welfare Reform and Pensions Act 1999. Amendment No. 200 corrects a technical error in the Pensions Act 2004. Finally, amendments Nos. 216, 234 and 287 relate to work in progress, in conjunction with the Law Commission, to consolidate private pension legislation.
In summary, the amendments in the group support the Government’s simplification agenda and, importantly, they also make the system fairer. I commend the amendments to the House.
Andrew Selous (South-West Bedfordshire) (Con): I, too, join the Minister in welcoming the Kindertransport provisions, in particular, and pay tribute to the group of MPs whom she mentioned who were instrumental in bringing those provisions on to the statute book.
I would like to concentrate on the so-called Baroness Hollis amendment. I also pay tribute to her and to the others who have campaigned on the issue. The amendment will make a welcome difference to a defined group of women who will be able to buy back an extra six years to improve their basic state pension—quite considerably in some cases.
The Government tell us that the measure will be cost-neutral. As has been noted already, there will be an increase in the cost of the class 3 national insurance contribution to reflect the increasingly significant value of those contributions, given the reduced number of qualifying years needed for a full state pension. We understand from Lord McKenzie of Luton, the Minister’s colleague in the other place, that around 110,000 people are expected to benefit from the package. So far, so good.
I noted with interest that Lord McKenzie also pointed out that the true actuarial value of a week’s class 3 national insurance contribution is around £45. It is worth making the point that, even though the cost has gone up from £8 last week to £12.05 now, that is still pretty good value for the whole category of men and women who will benefit. That does not include everyone, but the people who will benefit should look to take advantage of the offer.
However, my attention was drawn to some comments on the proposals from Ros Altmann, who is a very respected commentator on pensions issues. Indeed, I believe that she is a former adviser to HM Treasury on pensions matters. For some of the time, she has perhaps been a thorn in this Government’s side, but many people would say that she has done sterling service for pensioners generally.
Ros Altmann welcomes the fact that the extra years can be bought back and points out that this is not just the women’s pensions issue that it is sometimes called. It is important to put on the record that men who were carers or disabled will also be able to benefit. She points out that it is not a free offer: those pensioners or people about to come to pension age who wish to take it up will be paying slightly more for the privilege. However, she also says that the offer is aimed at a quite narrowly defined group of people—specifically, those who already have 20 years of national insurance contributions. Only they will be able to buy back the extra six years, so the offer emphatically does not apply to all women. I know that that is the subject of the amendments from the hon. Member for Northavon (Steve Webb), to which I shall come shortly. It is also worth making it clear that people who retired before April 2008 cannot buy any extra state pension entitlement at all. Any existing pensioners who retired before April 2008 who may think that this is good news need to know that it is not an offer for them.
I have some questions for the Minister, and some of them were asked by my colleagues in the other place. I am not exactly clear what the answers are, so I would be grateful if she tried to address these points when she comes to reply. If she is not able to do that, perhaps she will write to me with the information, but I should be grateful for an answer if that is at all possible.
First, I should like an assurance that the increased revenue that the Government will get from the increased cost of class 3 national insurance contributions will be no more than the extra payments made. I ask that because if, through the extra costs that they are charging
pensioners, the Government gain more revenue than they pay out, this would be a revenue-raising measure. I am not suggesting for a moment that that is the Government’s intention, but I should be grateful for some clarity that the extra revenue raised will be paid out.
Secondly, have the Government made any estimate of how much pension credit may be saved as a result of these provisions? If they believe that there will be a reduction in pension credit, has the Department considered the possibility of incorrect targeting? I ask that because, of course, the group of people who would lose out on pension credit entitlement should not be the ones who take up the offer in this set of amendments.
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Thirdly, will the Minister give the House more information on the information campaign that the Department intends to launch on this matter? As has already been established, there are groups of people who clearly will benefit, and others who should not take advantage of the offer. We know that pensions already mystify a lot of people. It was suggested in the other place that the national insurance recording system could be looked at so that those identified by Pension Service officials as likely or certain to benefit from this offer—the 110,000 people to whom the Minister’s colleague in the other place referred—could be written to.
While I am on the subject of those 110,000 people, will the Minister confirm that that is indeed the figure? I noted that Baroness Hollis said in the other place on 29 October:
“My Lords, something like 550,000 women could benefit”—[ Official Report, House of Lords, 29 October 2008; Vol. 704, c. 1597.]
Perhaps the Minister could also explain the difference between the figures of 550,000 and 110,000.
Will the Minister tell the House who will run the information campaign? Is it intended to be the Pension Service, or will it be a joint campaign with Age Concern, Help the Aged and the other organisations with which the Department often works in partnership? These are important issues: if the offer is not to confuse people further, they will need help to understand what is a very complex area. Indeed, Ros Altmann has suggested that people should consult an independent financial adviser or go to a citizens advice bureau or the Pensions Advisory Service. She makes the point that it might be best for people to wait until just before retirement before they make a decision, as their situation is likely to be clearer then. She also sounds a warning note to those women who may qualify for a full pension by virtue of their husbands’ contributions. That point needs to be borne in mind as well.
I turn now to the amendments tabled by the hon. Member for Northavon. In my speech so far, I have alluded already to a number of his concerns, and specifically to the groups of people who are not covered by the offer. We need to be clear about that. I have looked at his proposals, and I understand where he is coming from. I have general sympathy for the point that he wants to flag up to the House, but the cost—between £3 billion and £5 billion—is pretty high, as the Minister has said already. We need to be clear about what new
money would be raised through taxation or what expenditure would be forgone to meet that pretty substantial financial commitment. The Minister in the other place said that the price tag for what the hon. Gentleman was seeking was “very substantial” and, indeed, “unaffordable”.
I turn now to the issue of sharing data on pension credit details with energy companies. We in the official Opposition support data sharing, because we realise that many people in the country are greatly worried by the serious nature of their fuel bills. We want to do all we can. We want the Department to play its part in relieving fuel poverty, which will dominate many of our constituents’ minds this winter in particular. We therefore welcome the move to ensure that the relevant vulnerable groups are able to benefit from the social tariffs that the energy companies are offering.
However, the data sharing needs to be subject to two specific considerations. First, it must be done with the agreement of the pensioners concerned. The release of data about a pensioner or any other benefit recipient is the release of personal and private information, and all citizens should have a right to know that it will not be divulged to third parties without their express agreement.
I noted with concern that in the other place, Lord McKenzie of Luton said about the agreement of pensioners to data sharing:
“A potential opt-out is being considered and worked through”.—[ Official Report, House of Lords, 17 July 2008; Vol. 703, c. 1393.]
He was referring to an opt-out for pensioners who did not want their details to be passed on to the energy companies. The word “potential” worries me greatly. Can the Minister give us some clarity about that? Can she tell us in clear language that if a pensioner does not want their details passed on to an energy company, that will not happen?
The second concern is hardly a surprising one. The official Opposition want to see robust safeguards to protect the security of the data that are transferred. There has sadly been a catalogue of lost Government data in recent years, going back to earlier this year when the child benefit data were lost. Sadly, we know from questions asked by my hon. Friend the Member for Welwyn Hatfield (Grant Shapps) that virtually every Government Department has lost often fairly significant amounts of personal data.
I therefore again have a couple of specific questions for the Minister. Can she give us some assurance that if data are on memory sticks and laptops they will not be taken out of DWP or energy company offices? That is how many leaks seem to arise. Can we have an assurance that the data will be encrypted so that if laptops or memory sticks are stolen or lost, at least there is some chance that it will not be possible to read the information? The Minister said that the matter would be subject to full parliamentary scrutiny. Well, I and probably others in the House would like to see a bit of that full scrutiny now, and we look forward to hearing what the Minister has to say. I would appreciate some answers now; I do not want to be told that the issues will be dealt with in regulations. The matter is before the whole House and it would be good to have some reassurances.
I should like to ask the Minister about the pensioners and others whose data will not be passed on to the energy companies. I am a little confused about amendment No. 204 because it refers purely to passing on the details
of those who are currently receiving pension credit. Yet in the other place reference was made to those receiving pension credit over the age of 70. Obviously there are pensioners under the age of 70 who are in receipt of pension credit, so why are they being left out? Does the Department have any plans to leave out that group of vulnerable pensioners, who feel the cold as much as those over 70?
What about those who are entitled to pension credit but do not claim it? The Department has details of those people; it knows who they are. I know that it tries hard to contact them, but as my hon. Friend the Member for Eastbourne (Mr. Waterson) has just told the House, about 1.8 million people who are entitled to it do not receive pension credit—roughly a third of all those who are entitled to it.
More generally, what are the Department’s longer-term plans in this area? Does it intend to extend data sharing to all those in fuel poverty or on other benefits? Is it the intention to offer a social tariff to those on specific benefits? If the intention is to tie the offer of a social tariff to those on a benefit, has the Department undertaken any research into benefit traps and work disincentives? If eligibility for a social tariff is withdrawn when someone gets into work, they may not want to start work until the winter is over because they would have to pay higher fuel bills.
I have asked a number of questions on important issues. I apologise in advance to the Minister. I know that she is new to the Bill, but these important matters—eligibility, the Baroness Hollis issue and data sharing—are of great concern to all our constituents.
Paul Rowen: I pay tribute to those hon. Members, including the Secretary of State, who raised the issue of Kindertransport. I understand that it involves only 150 people, but it is important for them and it is good to see that an amendment will restore some of their rights.
Like the hon. Member for South-West Bedfordshire (Andrew Selous), I welcome Lords amendments Nos. 202, 203 and 228, which have been referred to as the Baroness Hollis amendments. They go a long way to right a considerable wrong. Lord McKenzie reckoned that there were 550,000 people in this category, 90 per cent. of whom were women. I welcome the fact that the amendments will allow individuals who reach state pension age between 6 April this year and 5 April 2015 to buy an additional six years of voluntary class 3 national insurance contributions, provided they already have 20 qualifying years on their national insurance record.
At present a woman needs 39 years and a man needs 44 years of national insurance contributions to get the full state pension of £90.70. Clearly, the decision to lower that to 30 years for both is welcome; it will go a long way towards making sure that people get what they are entitled to. However, some anomalies remain. For example, if a woman retires before 2010 and buys the six additional years, that will restore only 2.5 per cent. of her weekly pension per year she buys back, while those who retire after that date will get back 3.3 per cent.
The amendment tabled by my hon. Friend the Member for Northavon (Steve Webb) is on a different issue, but the differential between those who will retire up to 2010 and those who will retire after 2010 seems to be yet
another anomaly that has been built into the system. I suppose that when it is advantageous or disadvantageous to retire is a decision that bedevils the whole issue of pensions and pension credit. I hope that the Minister will look into it; it is important.
My hon. Friend the Member for Northavon will raise the issues that he has raised previously with further buy-backs. I agree with the hon. Member for South-West Bedfordshire that it would help if we knew what publicity programme the Department was planning on buy-back. As we said when we talked about personal accounts, it is important that people have information if they are going to spend money and then end up slightly worse off or only slightly better off. I hope that the Minister will reassure us that a proper process will be in place and that Citizens Advice or Age Concern, for example, will support people by providing that advice. She said that the scheme will be cost-neutral for the Government. The worst that could happen would be for a woman to enter into the arrangement and find that she is worse off.
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Amendments Nos. 204 and 220 deal with data sharing. Again, I have to agree with the hon. Gentleman about the person involved agreeing to their data being shared. That needs to be made explicit before the data are handed over. We have issues about data sharing and data loss, not least within the Minister’s Department. Before we start handing out more data, we need to be clear what arrangements will be put in place. We also need the energy companies to enter into an agreement or code on how that data will be used.
The other issue, which has moved on a bit since the amendments were debated in the Lords, is that the Government have set in train a system of support for people with regard to energy and energy saving, although my hon. Friend the Member for Northavon says that it is complicated. It is restricted to people who receive pension credits. I wonder whether the Department should consider making the system available to a range of other people. I am sure all hon. Members want that support to be given widely because of the steep rises in energy bills that people have been experiencing in the past 12 months. If we are going to share data with energy companies, there is a wider issue to consider of what other data should be shared. If someone is disabled or on a particular benefit, we should ensure that consent is given.
I hope that the Minister can respond to those points. I look forward to hearing what my hon. Friend has to say. We are in complete sympathy with the issue that he wishes to raise, but it is difficult to support something when we do not have the full costs. Perhaps the Minister could write to us with more information on how she has arrived at the figures. I understand that my hon. Friend tabled questions but did not receive the figures until today. Whether we should go further might be a debate for another day, but it would help us to have the basis on which the Minister arrived at the figures.
Steve Webb: As you might expect, Madam Deputy Speaker, I wish to confine my remarks to amendments (a) and (b) to Lords amendment No. 202 and the Northern Ireland equivalent, amendment No. 203, respectively.
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