Pensions Bill [Lords]
The Committee consisted of the following Members:
Annette Toft, Committee Clerk
† attended the Committee
The Chair: Order. Before we resume our consideration of the Bill, it might be helpful to remind all members of the Committee about the rules of debate in Committee. Debates on amendments, or groups of amendments, should focus specifically on the purpose, content and impact of those amendments. Clause stand part debates allow for a debate on the specific content of the clause. Interventions should be specifically relevant to the question before the Committee at any one time, and hon. Members should avoid unnecessary repetition of points that have already been made. As far as possible, speeches should not be read out, and the reading of quotes and statistics should be limited to the minimum required to support the Member’s argument.
‘(8) The Secretary of State shall review the options for linking pensionable age to the number of years in employment so as to ensure that pensionable age is reached no later than 49 years after entry into employment. The Secretary of State shall report the findings of his review to both Houses of Parliament within six months of the passing of this Act.’.—(Malcolm Wicks.)
Rachel Reeves (Leeds West) (Lab): When we adjourned, I was responding to a rare intervention from the Government Benches by the hon. Member for High Peak. It was about health and safety, and whether legislation has helped to reduce inequalities by socio-economic group. I hope that some health and safety measures do make a difference, but as we have seen from statistics shown to the Committee earlier, different socio-economic groups continue to show marked differences in both healthy life expectancy and life expectancy. The hon. Gentleman will know from his constituency that there is a difference between people who are involved in manufacturing and heavy industry and those who work in office-based jobs, and the toll that their working lives take on their health. I hope, as I am sure he does, that health and safety legislation has made some difference to reducing those inequalities.
Hywel Williams (Arfon) (PC): The Minister often reminds us that we are dealing with the legacy that our children and grandchildren will receive, and the costs involved. We are also, however, dealing with the legacy of heavy industry and poor health conditions in the past, which will no doubt affect pensioners for 20 or 30 years after they retire.
Rachel Reeves: My constituency of Leeds West was built on engineering and woollen mills. Although much of that industry no longer exists, there are still many people coming up to retirement who have done physically demanding jobs throughout their lives. It is inevitable that that will put a strain on their health, as reflected in the healthy life expectancy and life expectancy numbers that persist.
The Minister will know that in his local authority, life expectancy is 79.8 years for men and 83.6 years for women. I am sorry to tell my hon. Friend the Member for Nottingham South that out of all constituencies represented on the Committee, men and women in her constituency have the lowest life expectancy. An average man in Nottingham is expected to live for 75.1 years, compared with 80.1 years for women. I recognise that we have been asked to keep statistics to a minimum, but there are great differences in life expectancies in our constituencies. In West Worcestershire, for example, men are expected to live until they are 79.2 years old, and women until they are 83.2 years old.
Rachel Reeves: I am suggesting what is in the amendment: we should look at all relevant factors and at the number of years over which people have contributed into the system. For example, if somebody has worked since they were 15 or 16 and paid into the system for 50 or 51 years, would it be right for them to receive their state pension a little earlier?
As the hon. Member for Arfon will know, in his constituency, life expectancy is 77.3 years for men and 81.9 for women, perhaps reflecting the industrial nature of jobs there. Members will know the figures for their constituency, so I will not read them all out, but if anyone is particularly interested, they might intervene and I wait in anticipation.
The amendment is a useful tool for analysing questions of differential life expectancy by socio-economic group and years in the labour market. When the current system was created in 1908 and built on in the 1940s, healthy life expectancy was not a measure against which the system could be built. We can now measure the differences in life expectancy between areas and income groups and, theoretically, make accommodations for them. For all the reasons I have set out, we should be looking at the problems that the amendment highlights. At least we now better understand the challenges our constituents face, particularly those from lower socio-economic groups and those who started working as teenagers.
In response to the Green Paper that the Government produced on a flat rate pension and also the future ways in which to uprate the state pension age, the charity Independent Age has called for future changes to raise the state pension age to
“not only be fair to different generations, but be as fair as possible to those with different needs and backgrounds within those generations. Where necessary, additional measures must be implemented to reduce any disproportionate impact on vulnerable groups.”
In particular, it cites carers, health issues, differing life expectancies—which we have dealt with today—women, and the effect of age discrimination. This was in direct response to the recent Green Paper, and I hope the Government will look at the amendment in that review, if not as part of this Bill.
As I argued on Tuesday, the way to do that is to build consensus around what needs to be done, to work out solutions in the long-term interests of people looking towards retirement in the future—whether in Kensington or in Glasgow; whether behind a desk or in a manual job—that introduce stability to the system and certainty for the individual, and also recognise the contributions that people make. I thank my right hon. Friend the Member for Croydon North for tabling this amendment. As I have said, we have all seen the changing pattern of working lives and differential opportunities and experiences in our families and in our constituencies, let alone between cities, regions and across the country. The distribution among socio-economic groups and geographical areas of life expectancy and healthy life expectancy bears witness to these changes. The amendment is an interesting mechanism by which we can deal with the issue. I look forward to hearing the views from the Government Benches on it.
The Minister of State, Department for Work and Pensions (Steve Webb): I have been thinking for a long time how good it is to serve again under your chairmanship Miss Clark, and how good it is to respond to a thought-provoking amendment from the right hon. Member for Croydon North. I saw him described in a parliamentary profile as “Frank Field without God”, which I think was meant as a compliment although I had to work that out. He brings many years of experience to the Committee. He has a history in social policy and was in charge of the Family Policy Studies Centre. His formative years in social policy were in the 1980s, before he came to this House, and that may have shaped the amendment. Many of the points he raises were particularly pertinent in the 1980s and I want to respond to some of them, in a positive way.
The issues raised by Opposition Members are important and significant. They have identified differences between social classes, regions and genders. Even on that short list, we start to see the problem with using the blunt instrument of the single figure of the state pension age as a solution to a whole range of very diverse problems. The issues of health and safety, emphysema, workplaces, and Welsh mining villages have been mentioned. One of the fascinating things about pensions is that someone’s pension story is their life story. Trying to deal with all the things that were unjust and unfair about it in a single age is quite a challenge, but it is a noble attempt, and I want to respond constructively to the amendment.
There are a lot of issues about trying to rewrite history and identify past injustice and put it right now. In principle, if we wanted to tackle the issue the right hon. Gentleman raises, would it be possible to do it from now going forward? We have just produced a Green Paper called “A state pension for the 21st century”, and if this was going to be a feature of the state pension system going forward, how would we design from scratch the issues that the right hon. Gentleman raises? There are formidable barriers to doing it retrospectively, but could we even do it prospectively?
Clearly one could now identify particularly heavy manual occupations. It is interesting that we have heard a lot of different points, such as “low-paid”. But pension provision for the low-paid is a different issue from that of people who do heavy manual work. We heard “monotonous”. One cannot imagine a separate national insurance regime for monotonous jobs, although there were times today when I wondered if we should introduce one. The right hon. Gentleman is right to say that some people who work incredibly hard and do heavy physical labour might not reach the state pension age. That is changing quite dramatically, but they may not get a pension for very long. That is the fundamental point that he wants to address.
We could, in principle, have different national insurance rates for different occupations. We could identify categories of heavy manual work or whatever, but then there would be a question of whether a person has spent their whole life doing heavy manual work or a minimum number of years. What if they worked in mining, for example, but as a clerical worker? Would someone have to take each individual job and categorise it according to whether it would lead to a lower life expectancy?
These things are all possible, but create all sorts of anomalies. One can imagine doing a heavy manual job in what was fundamentally an administrative sector. There is a danger of radically complicating the system. I usually say that Oppositions demand simplicity and Governments legislate for complexity. Actually, this Government are trying to legislate for simplicity in pensions—a simple, single flat-rate state pension and common state pension ages—and these amendments would potentially create great complexity.
Let us pursue the idea and suppose we could look ahead. The hon. Member for Erith and Thamesmead made a good point about the private pensions sector, where the issues that the right hon. Gentleman raises are being addressed through impaired annuities. We are going into a world where pension provision will increasingly be on a defined contribution basis, which people will turn into an annuity. If we can get the annuity market to work properly—we are getting there slowly, though there is more to be done—the pensions of people who have had the sorts of lives that have been described will be bigger precisely because of that.
Annuity providers, as the hon. Lady rightly said, can go down to postcode sectors and can consider all manner of life histories. They can do health checks if they want to. So strangely enough, in the world we are going into, the pension system of the non-state sector will be more sensitive to the important points that the right hon. Gentleman raises than in the past. I welcome that, and we need to do more to ensure take-up of impaired life annuities. It is the one time when filling in a medical form that people should really make sure that they say that they smoke, because we need to make sure that people get what they are entitled to. That is a positive thing and I think it will help. We understand from the Association of British Insurers that only around 10% of those potentially qualifying for this sort of annuity actually take one up. There is huge potential to do more prospectively for people who have had this sort of life history. That is the first thing to say.
One of the issues about using that within the national insurance system is about drawing lines and categorising people. If we started today, we would be a generation
Steve Webb: It is certainly important if someone suffers injustice. The question is whether we need to restructure the entire state pension system to address an injustice for a small number of people, depending on how small it is. I take the point that every person matters, but there is an issue of proportionality that we need to bear in mind.
Malcolm Wicks (Croydon North) (Lab): I take the point about coal miners, which was on my mind this morning because of the compensation scheme for the debilitating medical conditions that many of those folk suffered from, and which I remember from when I was Minister for Energy. Let us take a different example. I do not have the statistics, but people in private or public care homes who do the toileting, bathing and cleaning are doing back-breaking work, and the numbers are probably higher now than they would have been.
Steve Webb: They are, and that raises interesting questions. Presumably, as time goes by, we would be constantly re-categorising new professions as they emerged and became more significant, and qualified for enhanced NI under the scheme as another dropped out. I hope that the right hon. Gentleman is beginning to see that the complexity of trying to identify ex ante the sort of jobs that will lead to shorter life expectancy. Essentially, his thesis is that people who have long and back-breaking working lives will have shorter pensions, and that is not fair, but the correlation between the length of their national insurance record and their life expectancy is sophisticated and complex, and does not neatly match occupations.
Malcolm Wicks: I will try not to interrupt too much, but I am enjoying the Minister’s analysis. He started by asking what the implications would be if we went forward on this. I am all for going forward, but I am also all for going backwards. Presumably he will later address my argument that if administrative records can prove that people have worked or been in the labour market caring for their children and so on for 49 years, they should receive a state pension. My main thesis is not the hypothesis that the Minister is testing using occupational groups. I see the problems with that.
I mentioned the decline in mining, but on a broader scale, the number of people working in manufacturing is down from 6.4 million in 1978 to 2.3 million today. Manufacturing is a broad category, but those are the sorts of people the right hon. Gentleman may be thinking about. The occupational mix is changing all the time, and trying to link national insurance categories to occupations, which is what would have to be done to proxy what he is trying to get at would be difficult.
Sheila Gilmore (Edinburgh East) (Lab): My point is simply that the purpose of the amendment is not necessarily to seek out specific occupational groups, although I understand from some of the examples given that that might have been the impression. It does not have to be that complicated.
Steve Webb: The danger, though, is that if we do not do that, would we want to pay an earlier state pension to someone who had worked in an office for 49 years? The amendment would say yes, but that is not what the speeches were about. There was a bit about the contributory principle, and we could have a long debate on that, but that would go a bit too wide. I do not believe that Opposition Members were arguing that someone who works 49 years in an office should be receive an early pension because they might die young.
Mr Marcus Jones (Nuneaton) (Con): My hon. Friend makes an extremely important point. He is right in saying that for the amendment to work the employment group would have to be attached to NI contributions, and there would be all sorts of anomalies. For example, if someone went into a manual industry at 16, and had the opportunity to do an apprenticeship or to go on to university and ended up doing a desk-based job, they could continue long beyond 65. Those are the sort of issues that would arise under the amendment.
Steve Webb: My hon. Friend is right. We do not have the records—I will come to how dodgy they are—to match past NI to occupation, and in broad occupational categories there would be different sorts of jobs, which are varyingly low paid or not, back-breaking or not, monotonous or not. It would be hard to draw the lines.
The right hon. Gentleman asked me to focus on whether we could today specify whether people had had a lifetime of injustice and to put it right now. The starting point is that national insurance records were not set up with that in mind, and they were not linked to occupations. In the mid-1970s, as I am sure the right hon. Gentleman knows from his time in my role, there was a big national insurance computer shift to the new system. The pre-’75 records are held principally in paper form. A one-figure summary is held, which essentially tells us the number of weeks of contributions people made before 1975. That might say 260 weeks, which could be five years at 52, or 10 years at 26—we do not know. I cannot envisage that he is really suggesting that
There is a more profound issue about the pre-’78 situation, relating to women. Home responsibilities protection to protect the rights of women—and men, but principally women at home with children—was brought in from ’78. Post ’78, we sort of know, even though there was a complete computer mess, which women were at home with children. The hon. Member for Islwyn mentioned his mother, who I think he said was born in 1954. I do not know how old she was when she gave birth to the first child in his family, and whether she was under 24.
Steve Webb: Yes. If I can have her date of birth, I will send her a birthday card. The serious point is that, if we take the example of the hon. Gentleman’s mother, we do not know that she was at home—assuming she was—with him in 1977, 1976 and 1975. It is a blank. So, as far as we are concerned, that is a year when she was not working or doing anything. If we applied the amendment that he is supporting, for 49 years or a full working life, his mother would not qualify. A problem with the amendment is that, although the hon. Member for Nottingham South said that women get a raw deal out of pensions, and I entirely agree with her, the amendment is pro-men. Partly because of the ’78 coming of HRP, it would do more for men than for women. That is not necessarily a bad thing, I suppose, but I do not think that that is the basis on which—[ Interruption. ] Perhaps it is. That is an important issue, because if we are talking about past injustice, for us to now go back and say that time at home with the kids pre-’78 does not help but time in a paid job matters, that almost adds insult to injury.
Sheila Gilmore: On the point about the pre-’75 records, somebody who was aged 16 in 1975 and entering employment would have been born in 1959 and would be close to retirement now. The problem with the 1975 records in relation to the amendment, which is about the age at which people who have not yet retired retire, is perhaps not quite as significant as suggested.
Steve Webb: Well, if we were to implement this amendment—let us suppose, for the sake of argument that we brought it in from the next financial year at the start of 2012—then that would apply to men born 65 years earlier and women born 61 years earlier, in 1951. In 1975, those women would have been 24 when we switched over to the new computer, so there are perhaps six or seven years when we did not have very good data. More to the point, if they were born in 1951 they would have had 27 years in which to have children, be at home with them and be penalised by the amendment. I did not start with the nitty-gritty of those practical problems, but they are very real.
When I put that to the right hon. Gentleman on Second Reading, he said what about income tax records? I stifled a guffaw at that point, because if he thinks that the national insurance records are dodgy—I do not know whether in his time in Government he ever saw any income tax records, and I have not consulted Her Majesty’s Revenue and Customs at length on this point—my suspicion is that pre-’75 income tax records, if they exist at all, are on parchment and I very much doubt that they would be useful as a basis for this.
He mentioned employment records in a sort of vague sense, but I do not know what they are. Of course, one problem is that we need to be systematic. We have to do this fairly for everybody. We cannot just use data sources that we have for some people. We have to be systematic and we need data sources that we can apply without going to back to clerical records. Much as I would like to be able to think of practical ways around those problems, I cannot see what they are and that is why I started by thinking about whether we could do it prospectively.
Malcolm Wicks: The Minister is making a thoughtful and detailed speech that I very much welcome, and I thank him for that. Just to clarify, I was not thinking about occupational groups. Obviously, a lot of the stuff that we have been talking about relates to heavy manual work that hurts people’s backs and knees and so on. I was simply arguing that if it could be proven that someone had been working since 15 or 16—even if it was in a white-collar job, which can be stressful—they should be part of, as it were, my grand design.
On the more substantive point about women, I understand the issues, but I would argue that someone could complete a proper application form that detailed their life story generally. When they started work can be proved through national insurance records; they then had children, family allowance and child benefit. If someone could put in what looks to be an authoritative application, it should be accepted.
Steve Webb: A whole can of worms is raised by that. From a sedentary position, the hon. Member for Leeds West mentioned child benefit, but pre-’78 it was family allowance not payable for the first child in the family, so even if we had the records from back then—we don’t—we would not know about the first child. That is just one of the issues. [ Interruption. ]
Steve Webb: Yes, but of course a birth certificate does not tell us whether the parent was at home with the child. It simply tells us the child existed. Unfortunately, the right hon. Gentleman needs more than that. There are inconsistencies in his argument. His argument for paying pensions early for people who have 49 years of contributions is that they have probably come from
My official has very kindly come up with a figure for the cost of the right hon. Gentleman’s proposal. I have to say the odd caveat is attached to this number. However, let us say that I am going to round it to the nearest £10 billion—it is £10 billion, at a stretch, in the time scale of this Bill, to bring such pension rights forward. Before the right hon. Gentleman intervenes and asks how I can know that because I have just said that it cannot be done, we have had to make some heroic assumptions about how it might be done. My point is that we are talking serious money. And who has to pay that money? Everyone who pays NI, including—guess who?—people doing boring, monotonous, low-paid manual jobs, so there is a complicated distributional impact to what he proposes, which needs to be factored in.
Another observation came up during the debate. To some extent, shorter life expectancy at pension age is exogenous; it is environmental or genetic, or a life of back-breaking toil. But a bit of it might be lifestyle choice. For example, the hon. Member for Nottingham South mentioned smoking because of a cigarette factory in her constituency. I am not specifically referring to that, because that is a very particular case. However, in general, if people have shorter life expectancies because they have chosen to smoke, should we pay them a state pension earlier to make up for that? It is a difficult question to ask, but it is a factor. We know that smoking rates have declined dramatically, which is welcome in terms of life expectancy. That is partly why the life expectancy of what we call the lower social classes has improved. Less smoking and less coronary heart disease is part of the story. Whether we should factor that into the state pension age raises questions.
Steve Webb: There is a whole raft of quite proper compensation for health and safety at work. That is right. We identified a group in which we could say that all of that group were deserving of compensation. The difference is that the amendment would lump together folk who did a back-breaking 49 years of toil and lived a blameless life with folk who did an office-based job who will probably live to 100. As soon as we say that it is not fair and that we cannot help the group that we want to help specifically, there will be a blunderbuss approach to the whole category. Another set of people will say that the system is not fair to them because they worked for 48 years, not 49 years, or worked in a fairly demanding but not very demanding job. None of those problems is fatal but, put together, they give us pause for thought on the amendment.
I want to make a couple of other observations, given that there are a lot of other issues that we want to get through this afternoon. Let us consider the extent to
It is often said in stock market adverts that past performance is not a good guide to the future, and the same applies to life expectancy. Some of the figures probably understate the extent to which folk in the lower socio-economic groups will have a longer life and a longer state pension than history suggests, because of the continuing improvements. I have a long table for seven social classes, six periods for men and for women, but I will not read it out—tempted though I am to do so. I do not want to minimise the issue of inequalities, but I want to give the right hon. Gentleman some flavour. He referred to 19% of men in social class 7 dying before the age of 65, but that period data does not take account of projected improvements.
For example, if we took the chance of a man aged 25 today dying before the age of 65 and used the period measure, we would get 13% risk, but if we used the cohort measure that takes account of improvements, we would get a 9% risk. So these things are improving. It would be an overstatement to say that we are solving yesterday’s problem, because it is clearly still a problem. I take that point but, to give an idea of the scale of the problem, it is worth using the cohort measures wherever possible.
Malcolm Wicks: Whether or not the issue is methodological, will the Minister let members of the Committee have copies of some of the tables to which he is referring? It would be helpful. I think he is saying that the routine class, on the measure that we are discussing, would be 9%. Has he the equivalent figure for social class I—the professionals?
Steve Webb: We are back in the lecture theatre, I think. There have been improvements across the social scale and although over, say, 20 years, those have been distributed unevenly and have hit more of the top than the bottom, the opposite is true in respect of the most recent figures.
I will give an example. Let us consider the period from 1997 to 2002 to 2002 to 2006—the latest five years against five years period. Life expectancy at 65 for men in the routine class rose the second fastest of all groups in the last five years—1.3 years compared with 0.7 years for men in the higher professional class. To give the ONS perspective, it says:
“While this only represents a return to the inequality of the 1990s, it does appear to be a change from the earlier trend…It is dangerous to attach too much significance to the figures of a single period, but these results are consistent with the hypothesis that inequalities were no longer rising for males in the early 2000s, as they had done up to 1997-2001.”
All I can say from those figures is that the situation is not static. The danger is that we hardwire into the state pension system something that reflects manufacturing industry in the ’70s and ‘80s and, before we know it, we have hardwired in something that does not mirror the current situation.
I have one other observation, because there is a tendency to choose the top and bottom social classes. When we use the five categories, as the right hon. Gentleman did occasionally, mentally we assume that those five classes are of equal size, but actually the top and the bottom together are less than 10% of the entire population. It might be assumed that vast numbers of people at the bottom are falling behind vast numbers of people at the top, when actually most people are in the middle. The differences in general are not as big as we might have thought from the debate.
The right hon. Gentleman has given us a lot of food for thought, and we are all grateful to him for that, as we are for the other contributions to the debate, to which I tried to respond as I went along. For the reasons that I have explained, I do not think that the right hon. Gentleman’s proposition or anything like it is practical going backwards, and it would raise some profound issues going forward. I took the amendment to be a probing amendment, and I imagine that he will withdraw it. However, I am more than happy to continue the dialogue with him in a constructive way.
Malcolm Wicks: I thank the Minister for taking the proposal seriously. Over the years he has gained a great reputation for going into great detail as well as using a philosophical framework. From role reversal with him, I know that he can pick arguments apart—not always successfully, but with great aplomb. I suppose I had rather hoped that he would use those very fine skills—I am not being cynical—to find a solution for me that was even more perfect administratively than my proposal, but he has been unable to do so. Before commenting on his speech, I shall reflect on those of my colleagues.
We started well today with the speech by my hon. Friend the Member for Edinburgh East, who reflected on lower life expectancy in parts of Scotland. I think she mentioned Inverclyde in light of recent experience there. To my surprise, she mentioned the Western Isles, which I have visited. They are beautiful islands, but they are cold in winter. Many of the occupations in the Western Isles would come into the category of those that might, sadly, produce lower life expectancy.
My hon. Friend the Member for Edinburgh East reflected on the causes of longevity and treated us to a taste of the various juices and medicaments—the socialist medicine—from the Clement Attlee Government, which, she argued, helps explain the life expectancies that are under discussion. We have also been reminded that public health measures—Victorian sanitation measures, hot and cold water, better housing and today’s measures relating to tobacco and so on—are very important. My hon. Friend the Member for Nottingham South drew on similar experiences from her constituency, but they were not repetitious. They reinforced the argument that many people’s life expectancy is far shorter than the average—or far shorter than that of people from richer backgrounds.
My hon. Friend the Member for Erith and Thamesmead also drew on personal and family experience. She thought
As an aside, if smokers get better deals than non-smokers, I do not understand how the private sector polices that. Is there a smoke police? As a former Social Security anti-fraud Minister, I am glad that I do not now have to police that situation in the private sector.
My hon. Friend the Member for Islwyn made a powerful speech, which, again, drew on constituency and family experience. He spoke graphically about people ending up being unable to do manual jobs, because it is a pain and a strain—the hands go, the knees go. He brought a very human and down-to-earth analysis to our discussions. The shadow Minister presented a compelling and authoritative analysis in support of the themes and ideas in the amendment. She raised some serious questions, for which I thank her.
There are two issues. Is this a serious question? Is there something in the measures that needs reflection and solutions? Many of us feel that it is a serious question. The Minister sees the point of it. We need to talk about the 1980s stuff later, by the way, to see what the Minister meant by that.
Even if we accept that it is a serious question, the more difficult question to answer is whether there is a viable solution to it. The Minister has cast a lot of doubt on that and I want to comment on his doubts.
Stephen Lloyd (Eastbourne) (LD): I thank the right hon. Gentleman for giving way, even though I am looking forward to hearing his response to the Minister’s doubt. I have enjoyed the amendment and what the right hon. Gentleman has said. I would add that it not only affects people who work in the construction business. My partner is a community matron. Nurses who have been nurses for 30 years find it more challenging as they get older, so I have a lot of sympathy and support for the 49-year principle. I have spoken to the Minister about it, and I spoke to the right hon. Member for Croydon North this morning.
My challenge, although I am glad the probing amendment has been moved, is in trying to square the circle. I know the Minister has responded and I have sympathy with him explaining how challenging and difficult this is. I wanted to flag up my support for the right hon. Gentleman’s amendment. I wait with bated breath for his possible solution to square the circle.
We have mentioned already the importance of the Bill and other Government proposals. If the legislation goes through, as I guess it will, we could well be setting
Malcolm Wicks: Given that one sixth or one fifth of those around today could become centenarians, who knows what the hapless Minister at the end of the century will be advising Committees of this kind that the state pension age should be. The serious point is that we will return to this. Issues about fairness, and therefore social variables, are worth reflecting on.
Of course we understand that occupational structures are changing. The nature of social class is changing. A recent survey suggested that 70% or 71% of people now regard themselves as middle class, although I am bound to say that some of those are not necessarily on higher incomes than those doing skilled manual jobs. Some may be more insecure in their jobs than their grandfathers. That shows how occupational structures have changed. Despite the fantasies of those writing science fiction and those interested in advanced technologies, my guess would be that, just as in the 1940s there were people who were packers and cleaners, van drivers and machinists, factory workers and agricultural labourers, fishermen and firefighters, many of those jobs —not all, and not necessarily in the same magnitude—will still be done in the 2030s, 2040s and 2050s.
I mentioned people working in care homes under whatever ownership, be it public, private or voluntary sector. As we know, many of the people working in care homes are doing demanding work. Those looking after those with mental illness have work that is stressful mentally as well as physically. My guess is that their numbers have grown in the light of the demography we are discussing. Although, in overall terms, the numbers of people doing back-breaking work might well be in decline, we should not overstate that argument—the Minister did not. Those things will be present in the future.
I recognise that, in answer to the rather important question of what can be done, it is not easy. I confess that when I was drafting my paper, the bit headed “Conclusion” was not the easiest to write. I rather envied the Minister being able to call on researchers, civil servants and experts to think the matter through and see whether there might be solutions. I put it to him again that the art of judgment and the test of leadership are not to do the research to show why it cannot be done, but to test the research and the data to see whether it can be done. I hope he does not give up on that question.
To clarify, when I put forward what I might call my draft proposal that we should look at the reality of those leaving school at 15 or 16 and who have been at work ever since—we will come on to the issue of women, although we have touched on it already—I was not at
We hear today about people who after graduating got jobs in their early to mid-20s but who are now, because of ageism in the labour market, finding it difficult to get a new job in their mid-50s. I deplore that fact of course, but if we are talking about people who might only be in the labour market for 30 or so years—I think I have got that right—is it such a crime to suggest that those who have been in the labour market for 50 years should be treated fairly by the state and have a right to an early pension? I do not think it is.
Malcolm Wicks: Before I allow the Minister to ask his question, I will make one point, although I do not want to overdo it. When we look at those who are on whatever we now call incapacity benefit—the name is changed to confuse the innocent and, sometimes, the guilty—although the great majority of them receive it because of musculoskeletal problems, nevertheless the growing slice of that pie chart is the people in white-collar occupations, who are on incapacity benefit because of what we call stress. We should not necessarily assume that all those in office work should, after 50 years of work, keep working a bit longer because that is what the Minister thinks.
One of the right hon. Gentleman’s proudest achievements in the previous Parliament, I assume, was the decision to pay a basic state pension after 30 years of contributions. Presumably, he thinks that was a good decision. Why was that a good thing, when he now suggests that people who pay for 49 years should get preferential treatment? Does that not go in the opposite direction?
Malcolm Wicks: I do not think that it does, does it? We thought the pension should be paid after 30 years because we were aware of the gender issue and the points that the Minister made about women and carers and so on, and the need to credit that in. We are saying that, after 30 years of contributions and once people have reached state pension age, they can get their state pension. If he thinks, as I do, that 30 years was a fair number in that argument, I do not see why he thinks it so outrageous that those poor guys and women who have been working for 50 years should not get their pensions. I do not see the logic of where he is coming from—but now he will confuse me more.
Steve Webb: So 30 is a magic number in the system, and yet 31, 32, 33, 34 and 35 bring someone nothing—just as 49 will be a magic number but not 48 or 47. Is there a big discontinuity in what the right hon. Gentleman is describing?
Malcolm Wicks: No, I do not think so. On the one hand when one meets the magic number, which the Minister wishes to increase, as long as one has 30 years of contributions—recognising gender, caring and so on—one will get one’s pension at, say, 65, whereas I am saying that, in the future, if someone can show that since leaving school they have been working or caring or in the labour market for 49 years or whatever it is, they should be able to get the state pension as a minimum. The arguments are not altogether different.
I understand that from where the Minister and his team sit, the administrative issues are really quite complex. I accept that. Despite welcoming his response, which he has presented in good spirit, I am not absolutely convinced that he has set the Department the task of seeing whether this really could work. I suspect the task that they have engaged with is to show why this is all a bit silly. Although the Minister is very bright, let us give him a bit of added evidence to show why the proposal cannot work. I do not think we have tested this out. I put to the Minister again the idea that—like everything else, there would have to be some kind of application form and evidence produced—if someone could produce an application form stating when they left school, giving whatever evidence they could of their employment record, their national insurance contributions, birth certificates for their children and their family allowances and so on, that application could be taken seriously.
Chris Evans: I am very interested to hear more about that idea, as the right hon. Gentleman was in charge of the chronic obstructive pulmonary disease scheme and the vibration white finger scheme. That was the type of thing that was used to research records for people who worked in mines at that period when they could not find anything. Is he envisaging something along those lines?
Malcolm Wicks: Yes, I think I am. Certainly, as I recall, in that important scheme, which perfectly properly cost the state several billions of pounds—it is coming back to me now from my days as Energy Minister—there were often arguments about how you proved whether someone was working on the surface or underneath the ground. The best that can be done in such circumstances is for people to present a case and then for the system to judge whether it seems a reasonable application for the pension that I am arguing for.
I intended the amendment to be a probing amendment. It has produced a useful debate. It has brought up social class. Sometimes people consider that an outmoded concept, but sadly, the evidence on life chances shows that is not the case—social class is still alive and a sad issue in our society. I think we have had a good debate. I recall from one of his documents that the Minister envisages that because we will need to return to these issues in the years and decades to come, he proposes—I cannot remember whether it is a Green proposal—that some kind of committee be set up to advise the Government of the day on longevity. Will he nod if I have got that right? I thought I had read that in one of the documents. If that is the case, I hope that this could be the kind of thing that that committee could look at, because I do not think we can just kick this issue into the long grass. It is a very significant issue. If we are to take public opinion with us on continually raising the pension age, the social class dimension needs to be fully investigated and we need to find solutions.
‘The Secretary of State must report to Parliament within one year of the implementation of this Act with details of the communication of changes in the State Pension Age to all those affected by this section.’.
The amendment was tabled because many of the objections raised to clause 1 are about the unexpectedness of the changes, and the element of surprise or, some might say, shock at the acceleration of the equalisation of men’s and women’s pension ages. The sheer volume of correspondence that I have received from constituents and the research carried out by Age UK have revealed to me the unexpected truth that many people are completely unaware of the changes.
Age UK carried out two types of survey—an online survey, which was self-selecting in a way, and a commissioned survey based on face-to-face interviews with 519 women. The women polled were asked at what age they expected to be able to draw their state pension, and 18% said 60 or below, 4% said 61-62, 12% said 63-64, 36% said 65, 12% said 66, 8% said 67 or above and 10% did not know. In reality, at the time of the poll, none of the women would have been able to draw their state pension before the age of 63. It is very surprising that they gave completely wrong figures.
Nearly nine out of 10 women polled said they were aware that the Government had announced changes to the state pension age, but those in social class AB were more likely to be aware of them than those in social class DE. About a third of women polled said that they did not know when, following Government proposals, the state pension age would reach 65 for both women and men, and only one in 10 correctly said 2018. Almost half expected equalisation to happen before the planned date, and 9% thought that it would be later than is planned. There seems to be total confusion, with very few people knowing the actual facts.
Although the proposals are new and are only filtering through, some women polled did not even understand the previous changes about already having to wait until after 60, which is very worrying. I have received letter after letter about people’s surprise and shock, and people have written that if they had known, they would have done this or that differently. Communicating the proposals to people is therefore really important, and we have discussed the website and how it can be changed and improved.
Another aspect surveyed was how much notice people would require or thought was right for raising the state pension age. Not surprisingly, the majority of people said that they would expect more than 10 years. When asked how they would expect to find out about the changes to the state pension age, 55% said that they would expect the Government to write them an individual letter to inform them. Given the number of letters that people receive from the Government over their lifetime on matters such as income tax, it is not too harsh to ask them to write to people about such a fundamental change. Some 37% of people said that they would want everyone to be informed through advertising, 20% said they would ask, 15% said that they would check websites
Writing a letter and being told personally are the most popular ways of being informed, but people might have moved and the Government might have the wrong address for them, so just writing a letter is not sufficient. Alongside writing to everyone, some form of advertising would therefore be fair.
I have a little plea that any information lines are not on 0845 numbers. In my constituency, the majority of people have mobile phones and do not have land-lines, and 0845 numbers are very expensive for people with mobile phones. They are cheaper on a BT land-line, but other than that, they are expensive. Until the Department for Work and Pensions gets to grips with 0845 numbers and negotiates with telecoms companies to reduce the rates, I plead that they are not used any more than they are at the moment.
Age UK’s survey was interesting. It was a surprise to me that so few people understood the facts. Although I do not welcome the changes, if there are to be changes the most important thing is that people know about them. People can plan for things they know about, but things that people do not know about, which come as a surprise, will simply be an added burden for them. Age UK has been arguing that people need sufficient time to plan for any increase in the state pension age. Its polling backs up what we are saying about a minimum 10 years’ notice, and it shows that people believe that the Government should proactively inform people of any changes.
There is a view among some members of the public that the Government know everything about them. They think the tax office knows everything about them—for example, if they move or get married—so there will be an expectation that the Government will write to them. I think that is fair, and I would ask the Minister to consider that seriously. Given the unhappiness among that cohort of women, the least he can do is write personally to tell them.
Rachel Reeves: I congratulate my hon. Friend the Member for Erith and Thamesmead on tabling the amendment and on encouraging the debate, as the amendment raises and seeks to address an important point. In total, 4.9 million people will be affected by the Bill. Will the Minister tell us how many of them know about the changes? Certainly, the 12,000 who have signed the petition to stop the changes and the thousands of people who have lobbied their MPs over past few months know, but they are a small proportion of the 4.9 million people who will be affected. I hope the Minister can tell us what communication strategy is in place for warning people of the changes; I have not seen anything so far.
Rachel Reeves: She was also born in 1954—March 1954. She is facing a delay in her state pension of exactly two years. As I mentioned in Tuesday’s debate, she knew nothing of the plans until I told her, and the phrase, “Don’t shoot the messenger” came to mind when I did so.
Even now, with the changes due in just five years’ time, or seven years, in my mother’s case, if she goes to the Directgov website, which I did this morning, pretending to be her—[ Interruption. ] I typed in her date of birth. When I clicked on the calculator, I was still told that she would receive her state pension on 6 March 2018 rather than on 6 March 2020, as it would be under the new timetable. I will give the Minister this: there are some warnings—the first page that I went to sets out the proposals—but if someone had gone to the website to calculate their state pension age, the big eye-catching button that says, “State pension age calculator” is probably where they would go. Similarly, if someone clicked into a website to find out about a mortgage, what they would look at is the button that says, “What you can afford” or “What will apply to you”. I clicked on that calculator and it asked me to input the gender and date of birth. I submitted that, and up popped a screen that said that my mother was due to reach state pension age on 6 March 2018. There is a link to the Government’s proposals, but it is rather like the terms and conditions that we know people do not read, rightly or wrongly.
I am sure the Minister will say that until the timetable becomes law—if it becomes law—the website will have to communicate the existing timetable. However, I urge him to look at the Age UK website. There, if my mother enters her date of birth, the screen that pops up will tell her in large font that under existing plans, she will reach state pension age on 6 March 2018, but under proposed legislation, that would change to 6 March 2020. The two dates sit alongside each other in the same font and size. Surely that would be a more sensible approach for the Government’s website as well? That highlights how problematic the five years’ notice is in conveying information. My mother—and the 32,999 women who are in the same boat of having to wait for exactly two years—is being told by a Government website calculator that she will be receiving her state pension in less than 6 years, 8 months’ time. She is trying to plan accordingly, only to find that in the autumn, the goalposts will have moved. Does the Minister think that is fair?
It is not just my mum. Age UK has recently undertaken an omnibus survey in which women were asked about possible changes to the state pension age. I will not repeat what my hon. Friend the Member for Erith and Thamesmead has said, but I will read a couple of quotes from the website:
“I love my work and put my heart and soul into it as well as very long hours. I worry about my health if I have to continue working at this pace for too long. Given that I presumed for many years I would retire at 60 and then do some part time voluntary work, the alteration in pension schemes has hit me very hard.”
This cannot be a new problem. With over a fifth of women expecting to receive their pension before they are 63, we know that this is not just a problem with this legislation, but a longer legacy issue. I accept that, and I accept that we now know that both the previous Labour Government and the Conservative Government before that did not convey the information that would have enabled people to have that knowledge. However, when those changes were made in 1995 to kick in in 2010, people had 15 years’ notice. There are only five years’ notice of these changes, so the risks are even greater that the men and women affected will not know. They have only a third of the time to find out, compared with the previous changes to their state pension age. It falls to this Government to get it right, now. We know that even with 15 years’ notice, not everyone knew of the changes, and with just five years’ notice there is a huge risk that people, when they are 63 or 64, still will not be aware of what their state pension age is.
Age UK has been arguing that people need sufficient time to plan for any increase in the state pension age, and its polling backs up its call for a minimum of 10 years’ notice. As was debated yesterday, the most common response to the question of how much notice should be given was 10 years, at 22%. The average number of years that people felt they needed as notice was 9.6 years. The Age UK survey also shows that people believe the Government should proactively inform people of any changes, as my hon. Friend the Member for Erith and Thamesmead mentioned.
In the absence of any previous communication strategy, will the Minister set out what such a strategy might look like if this legislation goes through? For example, will the Minister commit to writing to every one of the 4.9 million people affected by these changes? Would the Minister consider a TV or radio communication campaign, accompanied by adverts in national or local newspapers? How and when the Government plan to communicate their changes to the people affected is critical, but is often an overlooked area of policy. Stories gathered by Age UK highlight the significance of the notice period. One woman said:
“How can you plan? When the government say insufficient people plan or save for retirement, they make it difficult by constantly changing the rules. The system needs simplifying, guaranteeing for 10 to 15 years, and a minimum notice of 10 years of future changes. Life is complicated enough.”
“I retired early on ill health grounds and also care for my disabled husband. I now find that my retirement age which I had planned for at 60 has crept forward twice and will now be 66. There has been little notification of this change and too little time to adapt.”
Lilian Greenwood (Nottingham South) (Lab): I think my hon. Friend is very sensible to suggest—as many members of the public have—that it would be good if the Government wrote to every one of those 4.9 million people who are affected. There is also the possibility of advertising campaigns. Does she think there is a possibility that employers could also be engaged in this, and encouraged, when they are writing to their employees—as I am sure they do routinely, on many things—to highlight the change in state pension age?
Rachel Reeves: That is another useful way of communicating changes. Those may be communicated together with the changes to automatic enrolment that the Committee will discuss next week. There are issues about the information received by both employers and employees. We know that not enough people knew about previous changes, and the time people have to prepare for these changes is even more limited. We must, therefore, get the communication strategy right so that people can do their best to make necessary preparations and adapt to the changes that are arriving at short notice.
I have mentioned the website, and I urge the Minister and his colleagues to take a leaf out of Age UK’s book and give people information now. We will not get to Third Reading until the autumn, and by then more months will have passed and more women will have looked at the Directgov website and received what I believe to be inaccurate information. I welcome the amendment. I hope that the Government will accept it and do all they can to let those people affected by their policies know that they will face an increase in the state pension age. I urge the Minister to accept the amendment, come back to Parliament in a year and explain what has been done to communicate the changes.
Steve Webb: I thank the hon. Member for Erith and Thamesmead for tabling the amendment and giving the Committee an opportunity to discuss the important matter of how we communicate these changes. I agree with a lot of what she says. I entirely take the point that people need to know where they stand and that the Government have an important role to play and must be proactive. I assure the hon. Lady that we intend to do precisely that.
Obviously, we are bound by the legislation as it stands. Two days ago, had a couple of my colleagues taken a different view, we might have ended up with a different state pension schedule to that in the Bill. One can imagine the chaos that we would have wrought had we had a legislative timetable, a proposed amended timetable, and another timetable because the Bill had been amended. We have a duty to describe the legislation as it stands, but I fully accept that as soon as the law is changed, we have a duty to ensure that people know about that. We have tried to get that balance right on the Directgov website.
The reason we do not give equal prominence to the two different state pension ages, as suggested by the hon. Member for Leeds West, is because they each have an entirely different status. One age is the law of the land, and one is subject to the will of Parliament and has not yet been decided—it might have changed two days ago. We risk confusing people if we give them information in that form. I accept that we must alert people to the possibility of change, and the Directgov website—which I have visited—does that. The information has been refined. There was a period some months ago when it was probably not as clear as it could have been, but we now strike the right balance between stating the law, flagging up the fact that a change in the law is under discussion, and not giving equal status to the two different figures because they do not have the same status.
Steve Webb: As the hon. Lady says, depending on its progress through Parliament, the Bill—or a variant of it—will receive Royal Assent in September or October, which is about 10 weeks away. It would be nice to think that Government websites are incredibly flexible, and that we can put something up and it will all be fine. Getting a link to Directgov was quite a challenge. Integrating the new system with the database that calculates the current state pension age and will do the new one, is far less straightforward than it might appear. Hopefully, we are only about 10 weeks from Royal Assent. I will come on to how we will notify the women affected in a moment, but surveys on the website we have shown high levels of customer satisfaction with that section of the website. Our evidence from people who have visited the site shows that they are satisfied with the information they receive.
This is not an information vacuum. To give an idea of scale, the state pension age calculator website has had nearly 1 million visits since last November. The page “Calculating your State Pension age” to which the hon. Lady referred, has received over 800,000 visits. The newsroom page, which links to the page “Proposed changes to State Pension age” has had over 250,000 million visits since last November. A lot of people are looking and clicking through on the link.
Nick Boles (Grantham and Stamford) (Con): I apologise to the hon. Lady for pipping her to the post. Would my hon. Friend the Minister care to speculate on the reaction in Parliament, not least from the Speaker, were the Government to put on a website that some change is going to happen, when it has not yet received Royal Assent or been through the due process of Parliament?
Steve Webb: Indeed, it would certainly be pre-emptory and there are, as my hon. Friend knows, parliamentary rules that stop us spending money on things that have not been legislated for. We are probably sailing slightly close to the wind in what we have done but we felt it was an appropriate thing to do.
Rachel Reeves: Is the Minister saying that a quarter of the people who go on to the Directgov website click through to find out the detail of the changes to the state pension age? If that is the case, it does not sound like a huge number finding out what the facts might be. In terms of how difficult it is to change Government websites, if Age UK have managed to put it on their website, one would have thought a Government Department might be able to do it on theirs.
Steve Webb: With respect, the Directgov website is a slightly bigger enterprise and is controlled by a much more complex machine. On the point about clicking through, 250,000 people have clicked on that page but lots of people who ask to calculate their state pension age are not affected by these changes at all. There are a lot of people who visit the page but are not affected and have no reason to click through, so the hon. Lady cannot draw any inference from that.
As a Government, we issue very large numbers of pension forecasts each year. To give a flavour, last year we issued nearly 500,000 individual pension forecasts, 150,000 real-time pension forecasts—people getting information there and then—and 3.7 million combined pension forecasts, something the House may be less familiar with, where we integrate occupational pension forecasts with state pension forecasts. We are pumping out a lot of information and a lot of effort is going in. I take the point that a lot of that is reactive—you have to want to go to a website and ask for a forecast. The hon. Lady raises the important point about what we do for the people who do not ask.
Lilian Greenwood: I was interested to hear what the Minister said about people writing in and requesting pension forecasts. Has the Minister got any information about the age at which people tend to do that? I imagine it is not spread across the full range of peoples’ working lives and is focused on those closer to retirement. Is it people in the last couple of years of their working lives, or the last 10 years? That would be of interest.
Steve Webb: In terms of the individual pension forecast and the real-time pension forecast, I estimate that it is about 71% in the over 55s as a category and 21% in the 45 to 54 category. The hon. Lady raises an important point, which comes back to one of the reasons why people have not clicked with the Pensions Act 1995 yet. The women affected—who will be affected in the next few years—were in their mid-40s on the whole. If you put the word “pension” in a headline, women in their 40s do not read the article—present company excepted, I am sure. I am not being facetious; that is the problem we have. We must give people forewarning but if we go too far ahead they switch off. The hon. Lady asked a perfectly sensible question. As people get into their mid and late 50s they start to get very interested and this is when they ask for information.
Chris Evans : I am interested in the point about people not taking an interest in pensions. When I was working at a bank and actively selling pensions, I found that they were overly complicated to explain, and people would switch off and not buy into them. Do the Government have a wider strategy to explain what pensions actually are?
Steve Webb: The hon. Gentleman raises an important point. I had not realised we had someone on the Committee who used to sell pensions and we might probe that later. The challenge is simplicity, and I suspect I shall say that in response to quite a number of amendments. We feel the system is over-complicated. The state system that we are directly responsible for is grotesquely complicated, as clause 2 will demonstrate shortly. We want to produce a simple state system on which people can build, and
Coming back to the women who are affected by changes pre-2016, we have written individually to 1.16 million women who were born between April 1950 and April 1953 and retire in the 2010 to 2016 period.. They have already had letters indicating what their state pension age will be. Interestingly, the other day I signed off a letter to an hon. Member who was disgusted because his constituent was born in 1951 and the evil Government had raised her pension age. In fact, the evil Government—sorry, the Government—had not touched it and had written to her individually, but she still did not know about it. That demonstrates that—although she quite properly quoted the Age UK surveys—even when you write to people they do not always read the letters. We will never get to 100% on this. That is the first thing to say.
The second point is that we must wait until we get Royal Assent, but assuming we get it, we will send individual letters to 791,000 women and men born between 6 April 1953 and 5 April 1955. If we get Royal Assent in September, we will send those letters in the autumn. As soon as we have a statutory basis to issue those letters, we will do it. That takes us up to the people whose pension age comes at the end of this decade, in 2020. We are also putting more than £1 million into call centres, because when we send these letters, I suspect people will phone us, so we will put extra capacity into the call centres to deal with that.
Beyond that, we are researching the best way to reach the next 4.6 million people whose pension age is due between 2020 and 2026, who are also affected by the timetable in the Bill. Because of the numbers, the question is whether we use letter writing, television or specialist magazines—or a combination. We are at the stage of reflecting on the best way to do that. We do not have a definitive answer, but we will certainly endeavour to draw this to people’s attention in the most cost-effective way possible.
I hope I have reassured the hon. Lady that we take our duties in notifying people seriously. We will write directly and personally to everyone who is affected this side of 2020 and we will look at other measures beyond that. I hope that, in that spirit, she will withdraw her amendment.
Teresa Pearce: I thank the Minister for everything he said. It is welcome that this is being taken seriously. Information is very important and, as I said earlier, the anger and surprise was demonstrated in the letters that we received. As this may be one of the few things that we agree on in this Bill, I would like to press the amendment to a vote.
‘(1) The Secretary of State must make regulations setting out the qualifying age for pension credit.
(2) The qualifying age for pension credit from 6 March 2011 until 6 March 2020 shall be set so that the timetable in Schedule (Graduated timetable: qualifying age for pension credit) has effect.
(3) After 6 March 2020 the qualifying age for attaining pension credit shall be set at an age that does not exceed the age that a person qualifies for the state pension.’.
Any increase in the qualifying age for pension credit between 6 March 2011 and 6 March 2020 must not exceed the qualifying date set out in column (2) for any eligible person born on any day in a period mentioned in column (1).
Therefore, under the proposals, the poorest men and women pensioners are set to lose out with a delay in their pension credit of up to two years, with insufficient time to prepare. Not only do the proposals hit women unfairly and give them little time to prepare, they hit the poorest in society—a point accepted by the Government in their impact assessment. Pension credit ensures that anyone aged over women’s state pension age has a guaranteed level of income. It does that by topping up a person’s income to a guaranteed minimum level, known as the standard minimum guarantee.
Lilian Greenwood: We have already heard that perhaps people whose state pension age is increased will be able to rely on working age benefit, but does my hon. Friend agree that there is a huge difference between the level of pension credit of more than £130 a week and the level of working age benefits, which my hon. Friend the Member for Edinburgh East referred to this morning. For example, non-contributory jobseeker’s allowance currently stands at only £67.50 per week.
Rachel Reeves: I thank my hon. Friend for raising that point. In 2011, the pension credit maximum was £137.35 a week, about £60 higher than jobseeker’s allowance for a single person. An increase in the state pension age of two years means a corresponding increase in the age of eligibility for pension credit and will result in a loss of income of up to £5,000 for those most affected. In fact, that is an underestimate because it does not take into account the passported benefits, the eligibility for which is linked to pension credit. For example, if a person receives pension credit, that person will also be entitled to housing benefit, council tax benefit and help with health costs, such as dental charges or the cost of spectacles. A person in receipt of pension credit is entitled to grants or loans from the social fund and cold weather payments.
The Government are proposing that, with just a few years’ notice, such guaranteed income and associated lifeline benefits will be pulled out from under the feet of those unfortunate enough to be born in 1953 and 1954, in particular. As we debated on Tuesday, the Opposition believe that such a notice period is unacceptable for changes to the state pension age as well as for changes to the qualifying age for pension credit. The National Association of Pension Funds, in its response to the Government’s consultation, said that
The measure would maintain the qualifying age for pension credit at the previous timetable for women’s state pension age, thus providing a buffer of help with the transition for those least able to cope financially with the move. Those eligible to receive pension credit would do so on the same date as under the original timetable set out in the Pensions Act 1995 for state pension age equalisation. That would mean that potential future beneficiaries of pension credit—men and women who are currently in their late 50s—would not experience the markedly higher costs of pension credit income that would otherwise occur.
“The alternative way forward is to maintain the option of making means-tested benefits available at an earlier age than the SPA, i.e. to make the Guarantee Credit available, not conditional on jobsearch, sometime before the SPA is reached. Between 2010 and 2020 the minimum age for Guarantee Credit will rise as planned from 60 to 65 in line with the increase in SPA for women. Beyond 2020, however, and particularly if there is no sign of the differences in life expectancy by socio-economic class reducing, there is a good case for keeping the earliest age of Guarantee Credit, at least initially, at 65 even as SPA rises, and therefore keeping the earliest age of Guarantee Credit eligibility, say two years below the SPA.”
Unfortunately, the Government did not consider that option as a mitigating course or even as a transitional arrangement, so there is no impact assessment to tell us how much it might cost. Will the Minister tell us his cost estimate when he replies?
Lilian Greenwood: Does my hon. Friend share my concern that as we near the end of our discussion on the clause, we still have no idea what is in the Minister’s head about transitional arrangements? The hon. Member for Eastbourne said that he was looking forward to hearing from the Government about such arrangements, and certainly that seemed to be the assurance that was given on Second Reading. Does my hon. Friend share my worry that not only do we have no idea of what sorts of arrangements might be in place, but we also do not know what cost envelope might be appropriate?
Rachel Reeves: I thank my hon. Friend for her question, which relates to the one that my hon. Friend the Member for Erith and Thamesmead put to the Minister on Tuesday, when the Minister urged his Back Benchers to vote against my hon. Friend’s amendment because it left some gaps in relation to state pension age. Was that the only reason why he did so, or was it also because of the cost?
Similarly, will the Minister tell us whether this proposal might be rejected on cost grounds? If so, when the Government put together some transitional arrangements, as I still hope they might, what envelope of costs might be deemed suitable to help the 500,000 women who are impacted for more than a year, or particularly the 33,000 who are impacted for exactly two years?
I join my hon. Friends the Members for Nottingham South and for Erith and Thamesmead in urging the Minister to give us a ballpark estimate of how much he
Although the Minister has given us no cost estimates, I have asked the House of Commons Library to estimate how much it thinks our proposals on pension credit would cost. It estimated the current annual spending on pension credit for men aged 60 to 64 and the number of people in that age group who currently claim pension credit but will no longer be able to do so under the Bill. It estimated that the saving generated by that group’s no longer claiming as a result of the new timetable would be in the region of £3.5 billion. However, many people who will no longer be able to claim will claim alternative benefits instead, such as employment and support allowance, jobseeker’s allowance or some sort of income support, as my hon. Friend the Member for Nottingham South alluded to.
The pension credit minimum guarantee is £137.35 a week, but jobseeker’s allowance is £67.50 a week for a person aged over 25. Although the House of Commons Library cannot be exact about the number of people who would move on to other benefits, in reality, approximately half the savings generated by the change in the pension credit qualifying age as a result of the provisions will be wiped out. Therefore, the true cost will probably be in the region of £1.5 to £1.75 billion. Perhaps the Minister, with the help of his Department, can give us a more accurate costing. I urge him to tell us whether the costing will be in the ballpark amount he might set aside for transitional arrangements.
Putting into context the cost of these transitional arrangements, the cost of the new clause and new schedule would be in the region of less than 5% of the £30 billion total savings that the Government hope to achieve from the acceleration of the timetable for the increase in the state pension age. The Minister rejected our amendment on Tuesday on the grounds that it would cost £10 billion. He did not like the amendment tabled by my hon. Friend the Member for Erith and Thamesmead because it would have cost £5 billion. In the other place, the amendments tabled by Baroness Greengross and Lord Boswell were rejected, and they would have cost some £7 billion. Will the Minister tell me whether £1.75 billion is an acceptable amount to pay to smooth the transition and to support those least able to adjust to the plans, particularly the poorest? Does he believe that this is a cost of his transitional package?
Are the new clause and new schedule not exactly the sort of transitional arrangements that the Minister should be looking for? For a cost of 5% of the total savings generated by the proposal to increase the state pension age, he would be able to alleviate the hardship and burden inflicted on the poorest. If not, I go back to the question I asked in our previous session: what would an acceptable cost be?
Will the Minister also tell me whether he will engage in discussions with parties such as Age UK to determine whether this is the sort of transitional arrangement he might have had in mind when he said on Second Reading that he was willing to work to get the transition right? Let us remember that the Government’s current proposal, where the age for receipt of pension credit should track women’s state pension age, in line with the accelerated timetable, does not make a contribution to reducing the fiscal deficit in this Parliament.
Under the new clause and new schedule, the state pension age would still rise in response to increased life expectancy, although I continue to argue that the increase from 65 to 66 should commence in 2020, which would maintain the course for long-term fiscal sustainability. This is about fairer treatment for the poorest and least well off, who are in their mid- and late-50s and so are nearer to the pension credit age.
The Government, in their initial impact assessment, identified key criteria against which they assessed the timetable options for accelerating the increase in the state pension age for women and men and, consequently, the impact on the eligible age for pension credit. One criterion was intergenerational fairness. The new clause would not undermine long-term fiscal sustainability or prevent progress on intergenerational fairness, which are the Government’s other two criteria. It would, however, inject some intergenerational fairness in that it seeks to mitigate the concentrated impact on the poorest group of people who had the misfortunate to be born in particular months in the 1950s.
I want to pause at this point to share a story. This is a story about Mari-Anne and her husband Paul. He is 60 and she is 58. They contacted Age UK about their situation, and came to the lobby of Parliament in May to present a letter to their MP. I want to share some of that story with the Committee now, because it makes a specific point about how they are affected by both the increase in the state pension age and the increase in the age at which Paul will be eligible for pension credit. Mari-Anne said:
“In July 2009 my husband was made redundant and four weeks later I also was made redundant. I was lucky enough to obtain another job straight away but unfortunately this ended after only 11 weeks and once again I became unemployed. My husband managed to get a temporary job with an agency but the job ended at Christmas 2009.
Since then we have been receiving Job Seeker’s Allowance and have been desperately trying to find gainful employment since. Between us we have applied for literally hundreds of vacancies most of which we have not even had an acknowledgement from let alone an interview or an offer of employment. As we are now 58 and 60 years old respectively our prospect of ever finding work grows grimmer by the day. Therefore we are trying to survive on Job Seeker’s Allowance on which we have to pay gas and electric bills, water bills, phone, travel costs, clothing, food etc. We also have to pay part of our mortgage interest as we only get help with 3.63% and our mortgage company charge us 4.89%...we will eventually have it repossessed as we can't continue to afford the mortgage.
“On top of all that my husband qualifies for pension credit from November of this year. But I have now found out that we will probably not get this as the Government is trying to block people with younger partners from receiving this”—
as part of the welfare Bill. Her husband, because of the Pensions Bill, will get a further delay in receiving pension credit while Mari-Anne will have a further delay in receiving her state pension. In the last line they say:
“Therefore our last lifeline is being taken away from us”.
This makes the point that it is not just women who are affected by these changes, because the poorest men who could have got the pension credit at women’s state pension age will find that that moves further away from them as well. Just one story, but another example of the impact that these policies and Government policies on state pension age and state pension credit have on our constituents.
The other two of the Government’s criteria for changes to state pension ages were intergenerational fairness and the long-term sustainability of the pensions system. I accept that no changes to the proposals in the Pensions Bill must undermine either of those things. However, as the cost-saving for this amendment is likely to be less than 5% of the total savings identified, it does not undermine that. There are any number of options further down the line in terms of progressing the state pension age beyond 66 that could be explored if the Minister did feel that this cost was a risk to long-term sustainability. I argue that if I am correct in estimating it at being between £1.5 billion and £1.75 billion, it is not a huge cost to help with the transition for those most affected by the Government’s proposals. I ask again: at around 5% of the total saving proposals, is this an acceptable price to pay in order to protect the poorest from the harsh and sudden impact of the timetable in the Bill?
Lilian Greenwood: Does my hon. Friend think it is possible that this is what the Pensions Minister was concerned about in October 2009 when he was commenting on the then shadow Chancellor’s plan to accelerate the male retirement age from 65 to 66? He said:
Rachel Reeves: It will be interesting to see how the Minister responds in his wind-up, because it is the poorest who are being hit the hardest by the changes to the pension credit timetable, as the Government’s own impact assessment sets out. To be consistent with his earlier views, I hope the Minister will accept this amendment or at least set out what proposals the Government are looking at to help the poorest people and the people most affected by the Bill in the transition.
Let us consider what groups are most likely to suffer as a result of this change in the pension credit timetable. We have already had a very interesting debate about how life expectancy varies between socio-economic classes. Those in receipt of pension credit are more likely to be in the lower socio-economic groups. Research published by the Department for Work and Pensions shows that 50% of people in receipt of pension credit have had manual jobs. As the Government's impact assessment tells us, those in the lowest income groups are set to lose up to 10% of their pension income by the delay in pension credit of up to two years. On page 70 of the initial impact assessment it says,
Yes, the evidence shows that those in lower socio-economic groups have also benefited from improvements in their life expectancy although, as discussed, not
For women who will be dependent on pension credit, we have only to look at the difference in median pension savings between those of a 56-year-old woman of £9,100, which translates to £11 a week on a level basis, and those of a man of £52,800, which translates to more than £60 a week, to confirm how little prospect low-income women have of saving enough to cover their loss from the delayed receipt of pension credit. That is particularly so, given all we know about their labour market participation level—as we discussed on Tuesday—earnings, memberships of pension schemes and caring responsibilities. Those on lower incomes are likely to have less favourable health outcomes and they are less able to adjust to the short notice by working longer and saving more.
As we know, 19% of manual workers die before reaching state pension age compared with 7% for higher managerial and professional workers and, once they reach 65, people working in manual occupations can expect to die four years earlier than those in professional ones.
Lilian Greenwood: Does my hon. Friend agree that there is also a correlation between socio-economic class and race, and that black and minority ethnic workers, who historically have suffered discrimination in the labour market, are therefore more likely to be employed in manual unskilled work and might therefore be disproportionately affected by the proposals? Given the duties set out in the Equality Act 2010, do the Government not have a duty to try to mitigate that discriminatory impact?
Rachel Reeves: I want to come on that point because, although the impact assessment acknowledges that people from black and minority ethnic communities save and earn less and are more likely to be in receipt of pension credit, nothing in the Bill will alleviate the impact on the groups that will be particularly affected, as we have seen in other areas.
We know that poorer pensioners need extra support. The Government’s impact assessment shows that men and women born between 1953 and 1955 who are on lower earnings, have had interrupted careers and will be dependent on pension credit throughout retirement, will suffer the greatest percentage loss in lifetime pension income as a result of the accelerated timetable. It also shows that people who rely mainly on pension credit in retirement will lose proportionately more than higher earners, who can carry on contributing to their private pension saving if they work longer and who also tend to live longer on average.
Beneath the headline numbers, there is a worrying distribution between different ethnic groups, as my hon. Friend said. People of black and black British origin
People in minority ethnic groups are less likely to be saving for their retirement, while, according to the latest DWP family resources survey, white households are 10% more likely than any other ethnic group to have an ISA or premium bonds, and are over 30% more likely to do so than the group with the lowest saving rates—those of Pakistani and Bangladeshi origin. Consequently, they are less able to mitigate the loss in pension credit income. A person from a non-white ethnic group is twice as likely to be entitled to pension credit at the minimum age at which that benefit is paid, and labour market activity rates show that, for over-50s, non-white groups are less likely to be in employment.
“delaying the point at which the State Pension and Pension Credit become payable is likely to have a greater adverse impact on certain ethnic groups compared to others…This impact is likely to be stronger for those affected by a delay in Pension Credit income of more than a year”.
“disabled people are also more likely to be reliant on Pension Credit at minimum qualifying age than non-disabled people, there will be a proportionately greater impact for those born in 1954 whose entitlement will be delayed by more than a year”.
“However, we consider this is justifiable in the wider context of the need to ensure that the state pensions system (including Pension Credit) is to be both affordable in the long-term, and provide a decent income in retirement.”
I do not think that that is a justification. When we consider that to mitigate the adverse and disproportionate impact on this group would be likely to reduce the overall savings by less than 5%, it is very hard to see how the Government reached that conclusion.
I support an acceleration of the state pension age, although I stand by the Opposition’s amendment that sees no change before 2020. In the face of increasing longevity, our pension system does need to respond, but this amendment does not undermine those goals. It does, however, address the disproportionate impact that such an accelerated timetable has on the poorest, who had the misfortune, for the purposes of this Bill, to be born in certain months of the 1950s, and it improves the transition to a higher state pension age for men and for women. This is a transitional arrangement that does not affect the timetable proposed by the Government.
On Second Reading, the Minister and the Secretary of State said that they would look into transitional arrangements. Members on both sides of the House went away with the view that these would be forthcoming for the Committee stage this week. Yet this is the third proposal that we have debated in Committee, and it is no doubt the third that will be rejected, although I wait to have assurance from the Minister. First, we had the amendment yesterday, which saw no change before 2020, and then a rise in 2022 in the state pension age to
I ask the hon. Member for Norwich North, what has been the result of her regular meetings with the Minister, urging him to look again at how women could be affected? In the Norwich Evening News on 6 June, the hon. Lady said:
“There is a real and justified concern that the changes to the state pension age are deeply unfair, particularly to the 33,000 women who are being asked to work two years longer at very short notice, and without time to plan properly for their retirement.”
“I agree with the Age UK protesters. These changes should be reconsidered. The Government needs to look at how to change the current plan to make it fairer to women. It is certainly important to increase the retirement age, as the current system is unsustainable”—
Rachel Reeves: I am interested that these are not her words, because this is what was quoted in the Norwich Evening News on 6 June. But if she says they are not her words, I feel sorry for the women of Norwich, who felt that they had a defender in the hon. Lady. I was going to ask if the hon. Lady still holds these views, but if they were not her views in the first place, I presume not. I am sure that she has written to the over 1,000 women in her constituency to tell them that those are not in fact her views at all. If those were her views, she would have plenty of company on the Government Benches. Two days after Second Reading, the right hon. Member for Bath (Mr Foster) signed early-day motion 1402. Five days after that, on 27 June, the hon. Member for Wells (Tessa Munt) signed early-day motion 1402, and even two days ago, when we were debating the very issue in early-day motion 1402, the hon. Member for Redcar (Ian Swales) signed it. More than 180 MPs, from both sides of the House, have now signed one of the two early-day motions calling on the Government to make no changes before 2020 to women’s state pension age.
I ask all Government Members present whether they believe that measures will be brought forward to ease the transition, and if not, will they reject the Bill on behalf of their constituents? Otherwise—and I hear nothing from them—when they vote today, how will they answer to the 500,000 women who felt a wave of relief when they read the newspaper reports on 23 June that the Government would be giving them a lifeline? I urge the Government to accept this amendment, but if not, then at least to set out why they said that they
Sheila Gilmore: The issue of pension credits links back to an amendment that we debated earlier today. The group of people we are talking about—both men and women—have not been able to work in the crucial years just before state pension age. We know that such people exist. We know from all the statistics that have been quoted, which I do not think I need to repeat, that substantial numbers of people are out of the labour force at that stage in their life. While some of them, as I said earlier, do so on a voluntary basis and have a reasonable income to support that, a substantial number do not have a fantastic amount of income or savings, or have health problems, perhaps because of the type of employment that they were in, or their job has come to end at an awkward time. Getting another job at that stage is not easy, however hard people try. The example that my hon. Friend the Member for Leeds West gave is a good example of the sorts of things that can happen to people. Such things are more likely to be experienced in some geographical areas than others, simply because of the employment situation. We do not always know when such things are going to happen—only this week, Bombardier announced redundancies. Such redundancies could hit older people, some of whom may have partners who also, for one reason or another, are not working.
The ability to claim pension credit at a slightly earlier age is of interest only to men at the moment, because as things stand, with women’s pension age still at 60, there is no difference for women as they will qualify for their full state pension, with or without some top-up from pension credit. Men are particularly affected. However, as women’s pension age rises in the next short period, some women will also be affected.
We are dealing with people who have found themselves in a difficult financial situation at that stage in their life An entitlement to pension credit could make a considerable difference to their quality of life, because the amount that is paid in pension credit—although some people may have other income and so would not receive the full amount—was intended to be substantially more generous than other means-tested benefits in recognition of the fact that that is what people at that stage in life need. From that point of view, it would be of considerable benefit to a sizeable group of people who are economically inactive, although that does not apply to everyone.
There will always be a cost. I repeat what I have said earlier in this debate and in other debates in the House: we need, at various times, to make choices about where we set our priorities, whom we assist and who must either meet higher costs or face the loss of certain services. However, the group we have been discussing should not bear the brunt of the difficulties and changes. The Government’s own impact assessment made it clear that groups such as ethnic minorities and the disabled will be most affected by the policy.
The Government’s view is that, while there is an adverse impact on those groups, it is justifiable in the wider context of making the state pension system affordable in the long term. The Government are making a judgment call. Our position is that that call should not be made and that it is not necessary. There are other ways—some
Those who are following this debate both inside and outside the House—one hopes that some people are interested, and they will certainly be interested in the outcome—will be disappointed that we have reached this stage and we are still not precisely clear what, if anything, will happen to mitigate the most adverse effects which the Government themselves admit will exist for some groups, which they consider to be particularly small. The Minister himself has acknowledged those effects. We are still unclear about what kind of proposals are going to be introduced. We have heard a number of reasons for that, including the fact that there has not been a great deal of time, but we would contend that the Bill is not hot off the press. It has been a matter of contention and debate for several months and has been through the House of Lords, where similar issues were debated at considerable length. There has been a lot of correspondence and campaigning on this, so there has been a great deal of time, I would submit, to come up with proposals.
All of the Opposition’s proposals, but perhaps not the new clause tabled by my hon. Friend the Member for Leeds West (Rachel Reeves), have been turned down by the Government. We wait with considerable interest to see how many people are affected, in what categories and what sort of transitional proposals may be introduced in due course. It would have been helpful to see those proposals in Committee. I said on Tuesday that if it was not possible to introduce them before the first day in Committee, I it should have been possible, given that timings are within the Government’s remit, to delay consideration in Committee for a short time to allow amendments to be tabled.
I support new clause 3. I suspect, perhaps wrongly, that the Minister may suggest that other proposals for further reform of the pension system, which have been presented in the Green Paper entitled “A state pension for the 21st century” may render the new clause redundant. If the proposal were implemented quickly, perhaps the need for pension credit would disappear. People would still be affected by changes in the pension age, but pension credit may be overtaken by further changes, although at this stage we do not know when, or in exactly what form, such proposals would be introduced.
This is a relatively minor proposal to try to address the position of people on the lowest incomes who have the least ability to continue in the labour market at that crucial age. For those reasons I support the new clause.
Malcolm Wicks: It is a pleasure to follow my hon. Friend the Member for Edinburgh East, because my questions for the Minister relate directly to her remarks. I look forward to seeing how the Minister reacts to the new clause.
I ask the Minister to give us his reflections and, as it were, his vision, about the group of people who are, say, four or five years away from state pension age, which will increase dramatically in the future for groups of women as we have heard. It is not clear that the Government have a vision for that group. If we make a comparison with NEETS—young people who are not in education,
Is there a vision or policy prospectus for those people who, although categorised formally as being of working age, are clearly not working? If I have understood the impact tables correctly, 42% of men aged 60 to 64 and 31% of women aged 55 to 59—to take the five-year group up to pension age—are classed as economically inactive. We have acknowledged that not all those people want to work. Different individuals make different choices. If people do not want to work and they have an occupational pension, that is fine, but why are some of the women aged 55 to 59 in that group economically inactive? Some 43.5% of women in that group are sick, injured or disabled, but not all of them will be sick, injured or disabled for a three, four or five-year period. Some will, but sickness need not last that long. Governments have been struggling with the fact that we have an enormously large number of people on what used to be called incapacity benefit. Whatever the figures were, they trebled over a 20 year period. That is not a credible position, and we have been striving to enable and encourage those people to enter the labour market. Is that the Government’s view about people who have the temerity to be over 55 or, for men, over 60? Some of those people would wish to work and, to be blunt, some of them should be in work. That is what Governments have been trying to do.
Similarly, some people classified as looking after family and home will be looking after their children. In that age group, however, some will be carers for elderly parents. People do not stay carers for ever—the mum or dad they are looking after will sadly die and they may want to enter the labour market again. Whether they are men or women, do the Government have a view about that? What would be the response if I asked my local Jobcentre Plus manager, or if I asked the Minister formally, how high a priority is this compared with other priority groups?
I raise that as a genuine question, because of the serious concern, which I noted earlier, that we already have, and could continue to recreate, a pre-pension age group of people in the four or five years before pension age who—leaving aside those who have occupational pensions—are in a kind of twilight area. They are not in work, and perhaps the system is not making much effort to enable them to work. They are not top of the priority list for training or education. I could be wrong, but I suspect that they are not top of the jobcentre plus agenda. They are not in work. They are not pensioners, and they are jogging along on a range of benefits that are designed for quite different purposes. What is the Government’s vision? Is there one? How confident is the Minister that some of those people, defined as of working age, could get back into work in those final years coming up to their state pension entitlement?
Hywel Williams: I do not intend to be tediously repetitious but, in general, I welcome the Minister’s intention to modernise the pension system. The Committee began by recognising that equalisation and an increase
On the way to Committee, the right hon. Member for Croydon North said that he expected me to speak for two hours this afternoon or at least provide a joke or two. Two minutes is more like it. I thought very hard about such matters and recalled something that Evelyn Waugh said about Conservative Governments or, in this case, Conservative-Liberal Democrat Governments. He said that the trouble with Conservative Governments was that they never “turn the clock back”.
The Minister is looking forward. He is not turning the clock back, which is a good thing. Our debates over the past two days have been concerned with a small group of women who will lose out substantially. That is the only point that I want to make. He said that he was aiming for simplicity, but the effect of achieving simplicity over complexity is that there are hard categories and some people are left out. Some people at the margins inevitably suffer, and that small group of women have been identified as losing up to £10,000. I appeal to the Minister to make an announcement as soon as he can about ameliorating that particular piece of gross unfairness.
Steve Webb: I hope that our reasons for including clause 1 are apparent, so I do not need to restate them at great length. As the Committee will appreciate, the clause and its associated schedule bring forward the equal treatment of men and women, and the move to the age of 66. The basic reasons for that have been stated repeatedly during the past hours of our debates, as has the dramatic improvement in longevity even since the Pensions Act 2007 was passed and during the four years of new and updated projections. I am horrified to tell the Committee that new projections will be published in the autumn. I shall not do an Arnold Schwarzenegger and say, “I’ll be back” but if I were a gambling man—we can guess in which direction they will go.
It is worth saying that the issue is something of a moving target. All the evidence suggests that, for the past century, we have been an awfully long way behind the curve. Clause 1 will start to rectify that. By 2020, when the clause is fully implemented and women draw a state pension at 66 years old, they will still be receiving a pension for 24 years, which is exactly how long a woman in 1990 who drew her pension at the age of 60 expected to receive a pension. So 30 years later, with six years on the state pension age, we are back where we started. When it is suggested that such a measure is draconian or unduly severe, it is important to stress that, in a sense, on pension ages we are running to stand still.
I want to say a few words about new clause 3 and new schedule 1 tabled by the Opposition. Members of the Committee will see that they are familiar. They are identical to those that were tabled in the Lords, and rejected by their lordships for several reasons. The hon. Member for Leeds West made a gallant effort to cost her proposal. I was greatly heartened by her speech. She was talking about costs, and I consider that we have
Cost is one important factor here, but it is one among others, such as workability and complexity. In responding to the previous group of amendments, I mentioned that there is a danger that we bring in yet more complexity, with the best of intentions. The new clause and schedule would do just that, because they propose that the qualifying age for pension credit would follow the track of the women’s state pension age from 2016 onwards set out in the 2007 Act, diverging from women’s state pension age, which itself will be divergent from men’s state pension age. We would be running three different eligibility ages in tandem. That would create anomalies.
To give an example, I will take the Committee forward in time to 2017. A 63-year-old woman is made redundant and applies for pension credit. First she thinks that she must be due her state pension and then she discovers that it will not be until she is approaching 64 or, at least, well past 63. She applies for pension credit and assuming that new clause 3 is passed, she is told that she cannot have pension credit until she is 63 years and 6 months. When she asks, “Why is it 63 years and 6 months?” the answer is that the 2007 Act would have made the women’s state pension age 63 years and 6 months, so that is the age for eligibility for pension credit. That would be less than her pension age and less than a man’s pension age. Is it different from the winter fuel payment age or the free prescriptions age? I have no idea.
All those things are intertwined. Running those different systems in tandem would create considerable complexity. It would also create some nonsenses. For example, post-2016 women would flow on to pension credit and two months later would flow on to a pension. Pension credit, as we have heard in the debate, is attached to various passported benefits. For two months they may get their rent, council tax and various other things paid by pension credit. Two months later, we would have to reassess then, cancel the claim, pay them the pension and stop the automatic housing benefit, all for eight weeks.
That is an extreme example. The point is that it would create periods of four, six or eight months between getting pension credit and getting a state pension. It introduces whole new layers of complexity, both for the system and for the individual who wants to know where they stand. We have heard how difficult it is to communicate what the state pension age will be. To communicate to people what the pension credit age will be and that it is changing and at a different rate to the other pension ages is grossly complex.
Rachel Reeves: I thank the Minister for costing the new clause and new schedule at £1.9 billion up to 2025. Can the Minister inform us of what the cost will be if it was only up until 2020? Perhaps he could publish the figures associated with the cost year by year and how it breaks down. Does he think there would be a difference in complexity if it was just a transition until 2020?
Steve Webb: If we read the new clause as saying that in 2020 the state pension age would quickly go up to 66, the cost is £0.8 billion. I am happy to write to the hon. Lady and put a copy of any details we give in the Library. I expect these are orders of magnitude, so I am not sure how detailed we can be. I am happy to write to her with as much detail as possible.
If it were to stop in 2020, there would be a set of women who thought they were going to get a pension at 65 in the early 2020s who would now get a pension at 66 and who would not get pension credit at 65. The hon. Lady may argue that that is tough, because they had 10 years’ notice so they can lump it, but given all the other arguments that she and her colleagues have been making about how difficult it is for those a year before pension age to live without pension credit, I am not sure whether that is an entirely consistent position. It would, however, be cheaper to do what she just suggested.
There is also the crucial issue of take-up. We know that pension credit has poor take-up and that a third of those entitled to it do not claim it. That is with a static system, with everybody knowing that they can get it at 60, because that is the women’s state pension age. The issue of take-up would be a nightmare in a world where the pension credit age changed every few months and at a different rate to the women’s pension age, with a different men’s pension age. If we were trying to run take-up campaigns, we would have different calculators on our website for the pension credit age, for the women’s state pension age and for the men’s state pension age. I hesitate to use this phrase, but that would be a web of complexity, and we do not want to go in that direction. There would be a few other undesirable side effects.
The Minister’s argument seems to be that if he does not give often vulnerable groups of people a pension, and if he rejects our proposals and does not give them pension credit, everything will be simple and clean, and therefore okay. Is he not in danger, in responding to the proposals this afternoon, of seeing them from the system’s point of view? Has he not been totally captured by the system—“what is good for the system is good”—because his humanitarianism seems to have been squashed out of him in the Department for Work and Pensions?
Steve Webb: The right hon. Gentleman’s comments reflect the Fabianism of the past 13 years of designing intricate, genius complexity. I am sure that the tax credit system looked elegant on a whiteboard in the Treasury; it just made everyone’s life a misery. It was not only that the system was complex, but that the people who had to deal with it found it baffling and overwhelming. The proposals are similar: they might sound good in Committee, where we all understand pension credit, but we cannot expect people to interact with the system and to know whether they are entitled to pension credit. We know the take-up of the current system, and a third miss out;
Malcolm Wicks: I think the Minister is saying that if we do not give those groups anything, the beauty of that is its simplicity, which is a ridiculous argument. I remind him that, despite the problems with any means-tested system, the pension credit gave some vulnerable pensioners, particularly women in their 80s or 90s, an extra £30-odd more a week, which they rather welcomed.
Steve Webb: It was entirely in the gift of the previous Government to increase the rate of what was then called income support, when pensioner premiums were £30 a week. It was not therefore pension credit per se that gave them the £30; that was a decision about levels. The decision to introduce the intricate structure of pension credit with the savings credit—I have never yet met anyone who understands it—was classic Brownism. I agree with the right hon. Gentleman that it is not about the system but about the individuals. However, if the proposals were agreed, those individuals would be expected to interact with a complex system, to follow it for a few months and then to go on to another system, which would not be great.
To address the right hon. Gentleman’s other point, we are not suggesting that folk live on thin air. There is a system of in-work support, and the question is where we draw the line between in-work support and work incentives—he asked about the vision for older folk, and I will come back to that—and how to have a clean dividing line between systems that apply to people, so that they know where they stand. The proposals would muddy those waters terribly.
Sheila Gilmore: The reason for moving away from income support to pension credit was to avoid so many people with small savings being ruled out as they approach the pension age. In the previous income support system, not only were the amounts much lower, but the means-testing, particularly in relation to capital savings, was much stricter. That was an attempt to enable more people to claim. It was perhaps complex, but it was a real attempt to give people a better deal.
Steve Webb: I will not deviate too far down that road; suffice it to say that the reason why the savings credit was deemed necessary was the chasm between the basic pension and the means test. The chasm arose from the 30-year link of the retail prices index to the state pension, which we have done something about. A decent basic state pension is a better solution than the intricate complexities of the savings credit.
The proposals would have perverse side effects. One feature of the pension credit is that it was penal on small amounts of earnings, whereas the universal credit, which we hope will be in place by the time our changes come into force, will give a much more generous allowance for earnings.
The right hon. Member for Croydon North asked me about a vision for older people. One of the important things that we believe is not that the state should determine a vision for sets of people, but that individuals should have choices. We have talked in Committee about flexible and part-time work and not going into full-time retirement. Part-time work is facilitated by the universal credit framework, not the pension credit framework. The amendments would push a set of older women—and men, for that matter—on to the pension credit rules, whereby practically all their earnings would be taken off them. In fact, many of them might want to keep some contact with the labour market, as he says. That contact might be interrupted or part time, but the amendments potentially rule out an option for them that we would not want to rule out. We could make consequential changes to that and have different rules in universal credit for people over different ages, but that would add yet more complexity, which is the worry.
Sheila Gilmore: It is often said that over 30 years, certainly if the earnings link to pensions had been restored, the gap would doubtless have closed. However, in the early days of the previous Government, when pensioner poverty was considerably greater than it has been latterly, it would have taken many years to get anywhere near closing that gap. The purpose of introducing the pension credit was to give people a considerable increase in income, which it did, over a short period.
Steve Webb: Tempted as I am to discuss at length the merits of the savings credits, it is worth saying that the take-up rate for savings credits is even lower than for the main pension credits. It is like throwing darts at a board and every second dart misses. Some of the measures hit the target, but it was quite a scattergun approach, and we have a better one in mind.
The overall context of the amendments and of clause 1 is to recognise the changes in our society, which we have been talking about in our deliberations earlier today. We need a dose of economic realism, which is absent from some of the amendments that we have considered. However, we recognise the issue about the particular group who will be affected, as I said right at the start of our proceedings. My right hon. Friend the Secretary of State committed us to looking at that transition, and that remains our position. However, we need to stick to the principle of fast equalisation and the move to 66, which I think the hon. Member for Leeds West has said that she supports.
Rachel Reeves: One of the specific requests that my hon. Friend the Member for Edinburgh East and I made in our speeches on the new clause is that the Minister addresses this question: if the Government are looking at transition and if they want other people to come up with transition mechanisms to support the group of people most affected by the Bill, will they give us some idea of how much such mechanisms are allowed to cost if they are to be considered? Is £1.75 billion or £1.9 billion okay if they are not too complex? Is £800 million for a transition up to 2020 okay if it is not too complex? Will he give us some idea of what the Government might set aside to help the transition for that group of women and men?
Steve Webb: As I was trying to say earlier, it is not simply a matter of cost, but a matter of finding proposals that are workable and do not introduce unnecessary complexity. There is a range of considerations. It is not an exercise of simply asking, “What can you do for £100 million?” The issue is not reduced to that simple question.
Our goal is clear: to recognise that as things move on and life expectancies increase, we need pension legislation that reflects that, but we need to make the transition fair. I reassert today that that is the Government’s commitment.
Rachel Reeves: Yes, I wish to press new clause 3 to a vote. My constituents, and all our constituents, want simplicity, but there is nothing simple about changing the state pension age and moving the goalposts again for that group of women. They do not think that that is simple, but that it adds a new complexity. What people to say to me, and what I expect all our constituents to say to us, is that they want incomes that make ends meet, pay their bills and allow them to do what they want to do, both during their working life and in retirement. The 1.1 million pensioners who were lifted out of poverty, particularly because of pension credit, would see that and other means-tested benefits as more than just a scattergun approach. Those benefits helped them live the lives they wanted to during their retirement, helping them pay bills and feed themselves and their families. I therefore dispute some of the criticisms that the Minister has made of that system.
My hon. Friend the Member for Edinburgh East asked what a transition might look like. We have debated three transition mechanism proposals that would help those most affected by the Bill, but all three have been rejected by the Government. I am not clear whether they have been turned down on the ground of cost alone or on other grounds, such as complexity.
On Second Reading and on other occasions, hon. Members have urged the Minister to find a way, even if it is complex, of helping those people who will be most affected. The hon. Member for Cardiff North (Jonathan Evans) has great faith in the Minister, who, he said, must find a complex solution if not a simple one. However, the Minister seems to be rejecting complexity, even though it might help such people. Although people want simplicity, more than anything they want to know that they will be able to make ends meet and have sufficient income to balance work and family life as they have planned.
My hon. Friend the Member for Edinburgh East asked what the Government will do to help with the transition, given that they have rejected three different proposals that would do just that. The Minister must provide more clarity not only for Opposition Members, but for the 500,000 women who will have to wait more than a year for their pensions, for the poorest men who will miss out on pension credit and for the 33,000 women will have to wait two years for their pensions because of the changes.
My right hon. Friend the Member for Croydon North discussed the Government’s vision. He referred to the support given to people in their late 50s and early 60s and asked whether such people should be trotting along on benefits or be supported, either through more appropriate benefits or through being helped back to work. The Minister seemed to reject the idea of a vision, but it would be good to hear more in Committee about what he regards as the options for such people.
The hon. Member for Arfon told some jokes and spoke about Tory Governments never rolling back the clock. He also expressed concerns about those who will miss out because of the Government’s desire to continue with their policies without introducing any measure, simple or complex, to help the people most impacted by the changes.
I thank the Minister for agreeing to give costings for the amendment and for his commitment to provide them on a year-by-year basis, particularly those up to 2020. It would be useful to break those down as much as possible in terms of national insurance and the difference between in-work and out-of-work benefits, so that we can see the impact of those differences.
Steve Webb: I hope I communicated that we will use our best endeavours, but inevitably these are orders of magnitude to assist the Committee. It will probably not be possible to provide the level of disaggregation that the hon. Lady seeks, but we will do our best to be helpful.
I still do not know whether the amendment is being rejected purely because of its complexity, or whether it is also because of the cost. I am none the wiser about how the Government plan to go about smoothing the transition, and easing the impact of the Bill on those most affected by it. The people who are following the debate will be none the wiser, too. They want to know what is being done in practice by the Government, the Secretary of State and the Minister, who made commitments to consider the transition.
I am sorry that we still have not got clarity. I suppose there is still time during our proceedings for the Minister to provide that information. He asked that others try to find solutions to the policies, so it would be good for hon. Members and people outside the House to have a framework to give them an idea of what the Government are looking for and whether they really want to try and help people, even if to do so is not simple.
Question put, That the clause stand part of the Bill.
The Committee will know that schedule 1 is a technical schedule with amendments consequent on the changes to the state pension age that we have been discussing. There are two types: amendments that amend the definition of pensionable age in a range of Acts, from the Gas Act 1986 to the Social Security Act 1992, and, closer to home, amendments that bring forward the date when certain amendments made by the Pensions Act 2007 were due to take effect. For example, for benefits to which people would otherwise be entitled at 65, we need to amend the legislation to refer to the pension age, rather than to 65, when the pension age goes past 65. I hope the Committee will find that uncontentious.
Steve Webb: Sad but true. I want to introduce the Committee to a niche part of the state pension system. We talked about complexity earlier. This is the doyen of complexity. This is the payable uprated contracted-out deduction increment, known in the Department as the PUCODI, to rhyme with Kirkcaldy. It gets worse, because when a spouse dies, the widow or widower can inherit a PUCODI, and 9,000 people have inherited them. It is an example of just how absurdly complex the pensions system has become.
To disentangle the different bits, a contracted-out deduction is the bit that comes off a person’s pension to reflect the fact that they contracted out of the state earnings- related pension scheme and its successors, and that the scheme has to provide them with something instead. They get a deduction because they contracted out, or a COD. If they put off the COD it is incremented, so it is a CODI, a contracted-out deduction increment. However, it is increased in line with inflation under different rules, depending on when it happened, what
We have had enough, really, and reached the view that there are bits of the system that are not achieving a great deal, and it is time we got rid of them. I can reassure the Committee that we are not taking any money off anybody who is currently getting one, so those who treasure their PUCODIs can keep them. Seventy-eight per cent. of these payments are less than £1 a week; 21,000—17%—are between £1 and £3; 6,000 are £3 a week or more. A tiny number of people who have been getting these things for a long time, and have a particularly obscure combination of circumstances, can get more than £10 a week, but if I tell the Committee that fewer than 1% of pensioners get those things, I hope that hon. Members will agree that their days are numbered. I would like to stress that we will carry on paying them to existing recipients, but we do not think that keeping that kind of thing in the system achieves anything for anybody. Therefore, under clause 2, we abolish the PUCODI. I commend the clause to the Committee.
Malcolm Wicks: Two points: first, that the Minister was able to make that speech almost without a note is either a credit to him, or something rather different. However, my second and more serious point is: what is the annual saving in public expenditure on that? It sounded very trivial, but the Minister is in many respects slicing away pension expenditure, and I wondered how many shillings are involved here.
Steve Webb: I am very grateful to the right hon. Gentleman. The answer is: annually managed expenditure savings of under £1 million, in 2011 price terms, between 2011-12 and 2015-16. So as cuts go, it is not the most savage.
Steve Webb: The Committee will have read that schedule 2 covers the amendments consequential upon the abolition of the PUCODI. There are often references in other legislation to particular bits of the system, and if we do away with a bit of the system and do not do away with the references, we have defective legislation. Schedule 2 is fundamentally a technical schedule that does away with this complex bit of the system. I commend it to the Committee.
Malcolm Wicks: Another anomalous part of our system, despite its excellent origins, is the extra 25p that is paid to people when they are over 80. Many people have put it to us over the years that this should be amalgamated into the state pension in some way. Why
Steve Webb: I have to say, I always think of my predecessor but six, and the things he left me to sort out. All I can say is that we are working our way through the list. We have reached this one. Who knows what will happen to the 25p, but we are having a look at it.
Steve Webb: The Committee will see that clause 3 is probably the simplest clause in the Bill, because it just says to read the schedule. The reason it says that is because the schedule is long and complicated, and we regard our legislation as akin to poetry. We do not like to disturb the flow of the poetry with long and technical detail, so we shove it all in a schedule, and clause 3 just provides for doing what it says in the schedule. If I may, Miss Clark, because clause 3 enacts the schedule, I will refer to the schedule, and not speak about the schedule itself again.
Clause 3 relates to consolidation, which is another juicy bit of the system. It was something that a previous Government legislated for, and it made a lot of sense. Consolidation tries to bring together historic rights and earnings-related bits of the state scheme and the contracted-out equivalents, into a single number rather than have a history of state pension that is built up from, for example, periods from ’78 to ’88 under one set of rules and ’88 to ’97 under another, and a different set of rules after that. It tries to take all of that—bits that are uprated at different rates, bits where the scheme has to uprate at one rate and the Government have to uprate at another—and collapse it into a single figure.
The purpose of that exercise, which I supported in previous legislation, is to help people know where they are going. Coming back to our earlier discussions, when people ask us how much state pension they will get, the letter we send them is utterly baffling. It has to be because it is full of caveats, qualifications and “what ifs”. Indeed, this issue of consolidation would help us a great deal with that because we would be able to say, “This is the figure and this is what will happen to it,” whereas at the moment we have to say things like, “The figure we have given you might turn out to be too low or too high or maybe it should be zero.” That is what our letters say because of the great complexity of the system.
Consolidation per se is a good thing. The question is, when should we do it? The previous legislation was designed to produce consolidation in 2020. That date was chosen specifically because it was the date at which equalisation of men’s and women’s state pension age was due to happen, so it seemed logical to do it at that point. Obviously, the Bill changes the date of equalisation.
I reassure the Committee that consolidation, which I support—which was legislated for by a Labour Government—is designed to smooth payments to overcome differences in indexation between additional pensions that the state pays and contracted-out rights, which just caused great complexity in the system. The purpose of all this is to give us the power by regulation to set the most appropriate and effective group and start date by order rather than have it in primary legislation. We will come back to the House when we have taken a view on that. It does not affect people’s pension rights overall. It can affect the profile of their pension rights through their retirement, but it is very much a simplification that we support and welcome. However, we want to ensure that it meshes in with our wider state pension reform agenda, so we are seeking the flexibility that clause 3 and schedule 3 would give us. I commend the clause to the Committee.
Teresa Pearce: I am interested in what the Minister says about simplification—getting rid of anomalies, bringing everything together. Do pensioners still get the £10 Christmas bonus? If they do, is that likely to be amended or abolished?
Malcolm Wicks: I want to ensure that I understand this one. The Minister said that the legislation on consolidation was introduced by a Labour Government so it is obviously right, but I want to understand why it is right. I can understand that people’s assessments can look very complex but, on the other hand, by giving some detail these assessments enable pensioners who have some understanding of their history to check that they are getting the right amount. People can accumulate some money from things that are now relatively obscure, such as the graduated pension scheme. Will the Minister tell me whether in the future people will still have enough detail to ensure that they get the right total amount? Some people would welcome the detail. The Minister said earlier that perhaps records are not what they should be, so we need to ensure that people understand.
Steve Webb: Taking those interventions in order, the £10 Christmas bonus continues for pensioners and those on selected other benefits—another thing that the right hon. Gentleman left me with. It has not been uprated since 1974 or something—certainly not for a while. There are an awful lot of corners of the system that could probably be looked at.
The point about consolidation is that we are trying to give people a statement of their rights in a single figure. It will be far more meaningful to them than saying, “You have a graduated retirement benefit of this; a gross additional pension of that; a COD of this; this bit is indexed by that and your scheme will index it by that, but it all depends on which period of service we are referring to.” The way we do it at the moment is not informative. It is baffling and, crucially, it is not fixed. That is the key point. The letters that we send to people say, “We think this is what your pension is going to be, but it might be higher or lower or might even be zero.” When we put consolidation in place, we can say, “We have taken all your past rights, converted them into a single number and this is what it is going to be.” The way we propose to do it will be much more informative than what is currently done.
To answer the right hon. Gentleman’s question in full if I have not already done so, clearly, we need to explain to people where the numbers come from. We will not just produce a number and say, “This is it; go away.” They will have to know where that number has come from and we will be able to do that. Most people will welcome the clarity that clause 3 and the associated schedule will bring.
‘(1) The Secretary of State must make regulations setting out the qualifying age for pension credit.
(2) The qualifying age for pension credit from 6 March 2011 until 6 March 2020 shall be set so that the timetable in Schedule (Graduated timetable: qualifying age for pension credit) has effect.
(3) After 6 March 2020 the qualifying age for attaining pension credit shall be set at an age that does not exceed the age that a person qualifies for the state pension.’.—(Rachel Reeves.)