Work and Pensions Committee - Minutes of EvidenceHC 1000

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Work and Pensions Committee

Pre-legislative Scrutiny: Draft Pensions Bill

Monday 11 March 2013

Steve Webb MP

Evidence heard in Public Questions 157 - 273

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Work and Pensions Committee

on Monday 11 March 2013

Members present:

Dame Anne Begg (Chair)

Debbie Abrahams

Jane Ellison

Graham Evans

Sheila Gilmore

Glenda Jackson

Stephen Lloyd

Nigel Mills

Anne Marie Morris

________________

Examination of Witness

Witness: Steve Webb MP, Minister for Pensions, gave evidence.

Q157 Chair: Welcome to you, Minister, on your own. No official?

Steve Webb: They are all behind me.

Q158 Chair: Welcome anyway. This is obviously the last oral evidence session that we will be taking in our prelegislative scrutiny of the Bill on the proposed changes to the State Pension. We have had a very interesting but very short timescale in which to look at the whole issue. I suppose I will just get started with some questions.

We have heard that, once the transition is finished, the new system will be much simpler than the current system and offer better pensions to those not presently accruing a State Second Pension, such as the selfemployed; however, it will give employees and carers just £4.11 pension per qualifying year, compared with a minimum of £5.29 per qualifying year if the present system were maintained-in other words, less. Is that a fair assessment of the overall impacts of the Singletier Pension?

Steve Webb: I welcome the description of it being much simpler, and obviously what would be lovely would be to start with a blank sheet of paper and say, "Right, from tomorrow everyone gets a flat figure and we all get on with our lives." One of the challenges for us in trying to keep it simple is trying to be fair to history. Obviously people reach 2017 with a whole diverse range of history, and we have to try to be fair to what has happened in the past, but not keep the past dribbling on into the future for another half a century. Once it is up and running, the proposition will be, yes, much simpler. Crucially, and perhaps missing from the characterisation you just gave there, it will be a perfect complement to the automatic-enrolment policy. We see the two as twin policies. If we are expecting people in work on modest wages to put money by, we have absolutely got to sort out the State Pension side of things. It is important to keep those two things together.

On your specific point about carers and so on, one of the important points is that the State Second Pension only came in, as you know, in 2002, so to have a lifetime’s worth of State Second Pension credits, from the age of, say, 18 to the age of, say, 68-for want of an argument-you would have to be in the State Second Pension for 50 years. Nobody would get a full lifetime of State Second Pension credits until 2052. Whilst it is true that we are accruing flatrate years at a lower rate than the combined basic and credited Second, because it would take decades for all the people who could have built up credits to get them into the system, that is not comparing like with like.

To give one specific example, women in their 50s now-say their early to mid50s-who spent time at home with children will generally have missed out on State Second Pension credits altogether. We are effectively retrospectively giving them credits for those years when they were at home with the children. They were only getting basic Pension Credit, and now we are giving them basic and Second Pension credits, effectively. It is inevitably more complex than you describe, so there are some carers who will actually get a better deal through this, for many decades to come.

Q159 Chair: It is true to say that there will be people for whom the Singletier Pension will be a worse deal than the one they have at present.

Steve Webb: What they have built up so far is honoured in full.

Chair: I am talking about if they were starting today, as opposed to in both systems.

Steve Webb: When this thing is fully mature, the cost of the whole thing will be less than it would have been. Of course, what we are doing is arresting the rate of growth; we are not cutting. We are seeing pension spending as a share of national income rising still, under these proposals, just not as fast as it would have been. As you say, some people will get less than they would have done, yes.

Q160 Debbie Abrahams: You have just mentioned that this is meant to complement the work around autoenrolment. Does that mean that you then have-I have not seen it if you do-a cumulative assessment of both the effects of the STP and autoenrolment? In particular, the Green Paper talked about reducing inequalities, which are a significant issue for people in retirement. Has there been a cumulative assessment of both and the effects on people, particularly those on lower incomes?

Steve Webb: Yes. We plan to publish, I think in the spring-that euphemistic phrase-a combined assessment of the sort you describe.

Q161 Debbie Abrahams: There has not been anything yet.

Steve Webb: We are near to publishing, but we have not published yet.

Q162 Debbie Abrahams: Sorry to push you on this. You are referring to, then, the evidence that is available through that cumulative assessment. It would be very helpful if that were available for the Committee to use in our deliberations.

Steve Webb: We have yet to publish very detailed projections, but I was just giving, in a sense, a description of what is in the public domain already. If we do not get the Singletier above the means test, then people on a modest wage are at risk of opting out for fear that they are not going to get any benefit from it. We have done some sophisticated modelling that gives you lots of facts and figures, but the basic principle is known to the Committee now. If the press started writing stories that said to lowpaid people, "Don’t bother saving because Steve Webb’s just going to means test it off you," they will not save and we have blown automatic enrolment. That is all I was trying to say.

Q163 Sheila Gilmore: Won’t some of those lowpaid people who you are talking about start in the next 10 years-or maybe taking the last 10 years as well-and go on building up the State Second Pension? Maybe it is not quite as stark as you are suggesting. There has been some criticism that people are thinking that it is £144 or £107, so, if they are missing out on £144, they have been misinformed. Even in relation to that argument, surely a lot of these people, by the time they are coming to retire, even in 10 years’ time, would already be building up a pension, which would complement the autoenrolment.

Steve Webb: To a point, I agree with that. To give an example, we will come on to discuss a particular group of women. The women born in 1952 and 1953, for example, are heading in the current system to a pension of about £127 on average, so it is not as stark, as you rightly say, as between £107 and £144. If they were heading for, say, £127, that still means the first £17 they save is doing them little good. Rather than have a complex conversation, we want to have a very simple conversation with people that says, "35 years, full State Pension, clear of the basic means test. Unless you are disabled or have a mortgage, the chances are you are going to be better off if you save." We want to keep it as simple as we can.

Q164 Chair: STP was introduced to be redistributive. It was actually very generous for those who were on low pay. Are there no regrets in seeing it passing?

Steve Webb: I suppose one of the frustrations for me with STP is, when I looked at the State Pension system, we had two separate State Pensions: one triplelocked, one priceindexed; one accrued over 30 years, one accrued over 49; one with some credits, another with a different lot of credits; one that was becoming flat rate, one that was flat rate. It seemed to me that, given State Second Pension was going to turn into an additional flatrate pension eventually, I would far rather do that now and get on with it, rather than let it glacially move into a single flat rate, which is essentially where it was heading, decades down the track. I wanted to get to that point of simplicity in a relatively redistributive way, because Singletier is still, in the medium term, pretty redistributive.

Q165 Nigel Mills: Can I take you to the start date that I think we are aiming for, April 2017? Could you tell us how optimistic you are that that will be the start date and what, if anything, might make it slip?

Steve Webb: The two things we have had to think about in terms of start date are, as it were, our computers-can we operationally deliver this new system?-and company pension schemes. With the abolition of contracting out, they may have to do valuations and decide how to adjust their accruals in the light of the changes, and they need time to do that. Those are the two things that we have to get right. I am increasingly confident that there is no risk of April 2017 slipping, and I can say to the Committee that I would hope to be in a position to be definitive about the start date before we bring the Bill to the House.

Q166 Nigel Mills: Does that mean you might put the start date in the Bill?

Steve Webb: We would generally not do that. Clearly people need to know and they do not need to think we are going to keep mucking about with it, but the issue with start dates in Bills is always, if something happened beyond our control-say the European Union suddenly imposed Solvency II on company pension schemes, with a massive impact-you might want the ability not to have to pass another Act of Parliament just to change the start date by a period. It is keeping that reserve flexibility, but clearly we will have to plan on a definite date; company pension plans will want a definite date. We will want to be as certain as we possibly can. In some ways, there is a risk of putting too much in Bills because then, if you do want to change something subsequently, you need primary legislation to do it and you do not have the flexibility you need. It is a balance.

Q167 Nigel Mills: I am not sure we are risking having too much in the Bill here. Having the date in this Bill is pretty fundamental, because we are expecting people and companies to plan their affairs around a pretty important date. There will be a suspicion that, if it is not in the Bill, perhaps it could slip by six months here or there. Actually, if it is written in legislation, it would be much harder to change it and that would drive behaviour towards achieving it, rather than moving it.

Steve Webb: I understand that. One of the disciplines we have in Government that our predecessor did not always have is the Office for Budget Responsibility, which signs off our fiscal plans a number of years ahead. We have to give a measure of policy certainty. We keep in our back pocket the opportunity if something pretty dramatic happens but, as I say, we will want to be as certain as we can prior to even bringing the Bill to the House. There will be a big political cost to changing it, so that is part of the safeguard.

Q168 Nigel Mills: There is the pesky hurdle of a General Election between now and 2017. Wouldn’t it be sensible to make sure that that date is in the Bill, so people could have some certainty that this will not change if there is a change of Government in that time?

Steve Webb: We hope that the legislation will be cleared with allparty support in this Parliament. I await to see, but I hope so. I hope then that we will be getting on with planning; company pension funds will be getting on with planning. You cannot bind a subsequent Parliament anyway, so it would not add a great deal to the certainty. If a future Parliament wanted to stop this, they could do it in a day.

Q169 Nigel Mills: In a day you could change the date, if you really needed to. Just to test your memory of these issues, are you aware of any other pension legislation where the implementation date has not been set out in the actual Act?

Steve Webb: It is a general practice to commence different bits of Bills, for example, by what are called commencement orders. I have signed in my time commencement orders. To give the Committee one example-I hesitate to say this-when I restored the earnings link, I did it by means of a commencement order. It was not a date in legislation; it was not an actual date. I signed to say, "This shall have effect with immediate effect." There is plenty of precedent for things being done through commencement orders.

I just want to draw a parallel to the 2008 Pensions Act, which was the one that brought in autoenrolment and NEST. There is quite a strong feeling, and I think the CBI said this in evidence to you, that that legislation was overprescriptive. There was far too much on the face of the Bill, which has meant that getting things changed that everybody now thinks need changing has got an awful lot more difficult. It is a balance. As I say, we hope to be a great deal more certain on the start date very soon.

Q170 Glenda Jackson: The start date has slipped somewhat disastrously already, hasn’t it, for those 80,000 women who were born between 6 April and 5 July 1953? When their pension age was raised by the Government in 2011, they were told that they would be eligible for the introduction of the new Singletier Pension. They are now being told that they will not. Apart from the possibility of the date slipping even further, can you reassure us on that? What steps are you taking to ensure that these women are not excised from the changes?

Steve Webb: You are of course correct. The White Paper said that we aimed for 2016; we have now said, "Not before 2017," so we have moved since the Green Paper. That is right. I hope that Members of the Committee have had a chance now to see the short note that we sent to the Committee earlier in the day, where we have looked very carefully at this group of women. The criticism seems to be that it is not fair because, if they were men, they would get a Singletier Pension; because they are women, they will not. We asked ourselves, "What if, hypothetically, you sent each one of these women a form and said, ‘Would you like to be a man? Would you like to have your National Insurance record but be treated as if you were a man born on the same day?’" In other words, they would be a Single-tier pensioner but at male State Pension age. Overwhelmingly, 85% of the women in the two groups would do better where they are than if they had the whole package that a man born on the same day gets, which is a 65 age and a Singletier Pension.

Glenda Jackson: You mean retaining their present gender, they would be in a better position.

Steve Webb: Better off, yes, absolutely. That might not be the happiest phrase I have ever used, I suppose. The point is that, typically, we have looked at these women’s position under the current system, and they get about £127 a week. With their National Insurance record, they typically get about £133 under the Singletier, so they would be about £6 a week better off. That is what they are missing out on. It is not £40 or whatever; it is £6 on average. That is what our figures tell us but, on average, they would have to forgo between £7,000 and £20,000 worth of pension if they waited until they were 65, which is what a man would have to do. That is the situation at the moment.

Q171 Glenda Jackson: Are you pretty confident that the date is not going to slip again?

Steve Webb: Very confident.

Q172 Sheila Gilmore: Nobody is an average. Nobody is an average person who has this £127 or the £133. There are indeed some who will be in a very different position. Isn’t that the case?

Steve Webb: Just to be clear what my 85% was, we have looked at a synthetic sample of all of the women in this group. We have not just done it on average. I have given you an average figure but, taking all of them, 85% would do better to be treated as women with women’s pension age than as men with men’s pension age, on the same day. Of the remaining 15%, two-thirds of them can DIY getting themselves a £144 pension by deferring. If they want a £144 pension at 65, they can defer from 63 or whatever at very favourable terms and turn themselves into people who get £144. Overwhelmingly, this group either does better as women or can turn themselves into people who get £144. 19 out of 20 are in that position.

Q173 Chair: Does that mean you are not minded to have any mitigation for this group of women? You think that the way it is in the draft Bill caters for the complaint that they have been making to us in great numbers.

Steve Webb: There are two things. One is that the perception of what is being missed out on is not the reality. There is a perception that, if only they were Singletier pensioners, they would be getting a lot more. As I say, we are talking about a figure of £6 a week roughly.

The second thing is we have had a look at some options. What we said to ourselves was, "If the Select Committee were to say, ‘This is a really important issue; do something,’ what could we do?" All of the options actually create a whole different set of problems. To give one example, if you were to say to people now, "You can either be who you are or treated as a man," then we would have to give people information about which would be better for them. Of course, we do not yet know in advance who would need the Savings Credit, because Singletier pensioners do not get the Savings Credit; current pensioners do.

What would happen if a woman chose to be treated as a man, did not get the pension until they were 65, were on a low income, came to us for Savings Credit, and we said, "Sorry, you have just rejected Savings Credit because you chose to be treated as a Singletier pensioner"? They would say, "Why didn’t you tell me three or four years ago?" We would say, "We did not know you were going to be a lowincome pensioner in retirement, because we did not know what was going to happen." There are a lot of issues of that sort. As soon as you try to give people choices and options, when you do not know for sure who would be better off, you create new losers, new complaints, appeals and optins. It just gets very messy. As I say, I am not convinced that the vast bulk of women in this group actually would do better if they were men on the same day. They clearly would not.

Q174 Sheila Gilmore: Doesn’t your response on this illustrate the fact that this reform is not quite the thing it is cracked up to be? If it is true of this group of women that they have more pension than they thought, so they are much nearer to £144 anyway and, for some of them, because they have been contracted out, they would not get £144 anyway, then actually this whole reform is not quite as fandabidozi as has perhaps been suggested.

Steve Webb: I think the record will show that "fandabbydosey" is not a word I have used to describe the reform. Joking aside, what we have tried not to say is: "Guess what, guys? It is Christmas in 2017. It is all misery, doom and gloom now, but if you just hold on until 2017, the sun will shine." It is the same budget. We are spending the same amount of money. What makes good pension policy is not just spending extra; it is delivering with what we have something simpler and cleaner. That is the point of the reform; it is not a windfall. On average, it is the same money.

Q175 Chair: Simplicity trumps all is what you are saying.

Steve Webb: Simplicity is fundamental, but we think the new system is fairer. To give you an example, there are groups who get credited in currently to the basic pension, but not the State Second Pension. In our world, a credit is a credit is a credit, so you get credited in to a year of Singletier. For the people whose credits apply to one but not the other, the new system is fairer. There are a lot of things about the new system that are fairer as well as simpler.

Q176 Stephen Lloyd: One of the things, Minister, that occurs to me, and I know my colleagues around the table agree, concerns the women who have contacted us from that sort of age cohort. I was very interested in what you were saying because, essentially, if my understanding is right, what you are saying is that far fewer people, even from that cohort, are losing out to the extent that they think they are. The second thing is that even some of the lines out there-"If they did X, they would benefit by Y"-are actually untrue.

It is complicated, even though it is a very small number, and I would like to suggest that the Department, I am assuming, is able to identify all 80,000 women in that situation, give or take. Rather than doing what you are trying to do in pushing the communications out to the media and so on-because pensions are so complicated, which is why we are simplifying it, and there are some slightly mischievous lines out there in the media-I just wonder whether it might be worthwhile for the Department to write to all of those 80,000 people with exactly what you have said to the Committee. You could then explain that, more often than not, it is not as bad as they think it is, and the consequences of doing X rather than Y. I wonder if that is something that you would seriously consider.

Steve Webb: I certainly think individual communications have a place. Where we have focussed that so far has been on the State Pension age changes. One of the things I have found is that in the 1995 Act, which had a massive impact on lots of women, nobody got a letter because it was 15odd years away. Now, we have come along, and for this group we are talking about-the 80,000-the most that we have added to their increased State Pension is six months, but many of them did not know about the increases that the 1995 Act had imposed, because nobody had told them. We have only added a maximum of six months to the 1995 Act, but that already added one or two years or more.

We have done a lot of individual writing to that group, though it is very expensive, as you can imagine. I have a slight feeling, judging by my writer’s cramp, that I may have already written to every MP on this subject, and I would certainly encourage local MPs to disseminate the information further. Also, as we get nearer to the Bill and finalising the proposals, there will be more communications to come. That group will be in a much clearer position very soon.

Chair: For some of us the 1995 Act was five years extra. Debbie, you had something else to add.

Q177 Debbie Abrahams: Minister, there are a number of people, mainly women, who have got poor NI contributions and would be retiring expecting to receive between £64 and £107 per week, based on their spouse’s contributions. Of course, they will not be entitled to it under this Bill. First of all, how many people do you think will be affected by that?

Steve Webb: The issue on derived contributions is quite surprising, because one of the things we discovered-and I will give you some figures in a moment-is that there is a set of people now getting these sorts of derived pensions that you describe who have never even been to Britain. If you have a spouse who has a National Insurance record, you can claim a 60% pension, the sort you describe-£60odd a week-based on their record when they reach State Pension age, even if you have never seen the White Cliffs of Dover-even if you have never been here. The reason I mention that is not to make an abstruse debating point. A growing proportion of the people who are getting these derived rights are not the traditional housewives-because, for all sorts of reasons, they are getting more-but people who we would never have intended.

Q178 Debbie Abrahams: What are we talking about-5%, 10%, 20%?

Steve Webb: 20%.

Q179 Debbie Abrahams: You can say that 20% have not actually lived in the UK and are getting derived rights.

Steve Webb: If I give you the exact figure, overseas the proportion of women reaching State Pension age in 2011, and based to some sort of pension based on their husband’s National Insurance record, was around 20% compared with 10% in GB. Whereas in GB the number of women getting a derived pension is falling, because women’s pension rights are improving, the numbers and proportions we are paying overseas are going up quite strikingly.

Let me answer your specific question. First of all, you cannot get the £60, the socalled married woman’s pension, but you can get a pension on your own record that will be in 35ths of £144. As long as you have about 15 years, 15 35ths of £144 gives you the equivalent of the £60odd you would have got anyway. We are talking about people who do not have, in a working life, 15 years. Assuming they were in the country for their whole life, they have had about 50 years. The question is: apart from the married woman’s stamp, which is a separate issue we have made separate provision for, what were they doing in 50 years not to get 15 years of contributions or credits? I hesitate to say we almost credit people for getting out of bed, but we credit people for working, for looking for a job, for being sick, for being at home with children, for being a carer, for being the spouse of a member of the armed forces and so on. The credits are so comprehensive that to manage 50 years in Britain without 15 years of contributions takes some doing. Mainly the people who will not get 15 years have not spent their lives in this country, so will have pension rights, potentially, from somewhere else. If they do not, it is more to do with the regime in those countries than in this one. A generation ago, I would have absolutely said this is a vital bit of the system. Today, it is a very unusual set of people who cannot even get to that figure.

Let me give you a couple of stats, if I may, because you have asked for some hard evidence. By 2020, we think that less than 5% of Singletier pensioners-women, female pensioners-will get less because we have got rid of this Category B. That is about 30,000 women. Cumulatively, by 2020, there will be about 30,000 women who will get less than they would have got, because we got rid of what are called Category B pensions. As I say, they will be people who do not even have 15 years.

Q180 Debbie Abrahams: On that basis then, I am assuming that you will not be reconsidering this in terms of derived rights and honouring those women that may be losing out. Is that what you are saying?

Steve Webb: Where you say "honouring", let me just clarify. There is a very particular set of women who had a legitimate expectation, because they opted out. They paid the married woman’s stamp, and then they get up to pension age. The deal, when they paid the married woman’s stamp, was they could get something on their husband’s record. We recognise that and we will honour that in the sense that what we have said is, if you paid the married woman’s stamp in the previous 35 years, then we will have special provision for you so that, essentially, you get at least the £60odd floor. We will honour the people who actively opted out of National Insurance on the basis of a deal. People who just never got to 15 years, these 30,000 or so by 2020, will get less than they would have done. In some cases it will be not much less-possibly only a few pounds less.

Q181 Graham Evans: Just a point of clarification: regarding the 20% that you mention have never stepped foot in the country, can you give us an idea of which countries they currently reside in?

Steve Webb: This is one of these things: it can be anywhere. Where the spouse lives, for example, does not matter; you are claiming on the basis of a UK National Insurance record. You can be anywhere in the world and claim on the basis of the National Insurance record of someone who has built one up in this country.

Q182 Graham Evans: 20% is a sizeable figure-one in five, a fifth. Can you give us an indication of, out of that 20%, which country has the most beneficiaries of people who have not actually been here?

Steve Webb: In general, the majority of pensions we pay overseas are to either EU countries or to Commonwealthtype countries. I cannot give you a specific country that is top of the league, but those tend to be the main countries.

Q183 Anne Marie Morris: The draft Bill does not specify the minimum number of years, but the White Paper has suggested it is going to be between seven and 10. As things stand, there is actually nothing to stop the Government saying, "Okay, it is going to be 15." I appreciate that you need flexibility, but clearly people also need some clarity so that they can plan. Is there any more certainty now as to what that period will be?

Steve Webb: I would certainly value the Committee’s thoughts on that issue. The numbers of people affected by that decision between seven and 10 are quite marginal. Just to give the Committee some new information-I hesitate to admit I was given it seven minutes ago, but I was given it seven minutes ago-if we chose seven years as the minimum qualifying period, we would be knocking out between 6,000 and 10,000 GB residents in 2017, so, in the first year, between 6,000 and 10,000. If we chose 10 years, it would be between 9,000 and 12,000. I do not dismiss a couple of thousand people, but those are the margins we are talking about among GB residents.

We also of course knock out people who do not live here at all, though to be honest the people who have a handful of qualifying years from Britain, and do not live here, on the whole have not had contact with us for a very long time, and a British pension is not part of their pension planning, to be frank. I mention the Aussie bar worker, who comes over, gets starting credits, gets a few years, never comes here for 40 years and has got six qualifying years, eight qualifying years or whatever. In terms of GB residents, the difference between those two is tiny and subject to a margin of uncertainty. If the Committee feels strongly that one or other is the right answer, I will certainly share the evidence I have, but it is pretty sketchy, because we are talking about very small numbers of people.

Q184 Chair: What is the number for nonGB residents who would be included if you went for seven years rather than 10 years?

Steve Webb: I will try to give the Committee a reliable estimate of that but, at the moment, one of the problems is we have quite limited data on a lot of these groups. In any given year, the numbers coming in on less than seven are quite limited, but they will grow over time. I will give the Committee a more precise figure in due course.

Q185 Anne Marie Morris: Are you still thinking around this range of seven to 10? I hear what you say in terms of the actual numbers between them not being huge, but clearly you could have looked for less than five. Are you saying that we do not need to worry; it could suddenly miraculously be 15?

Steve Webb: Where do these numbers come from? Until 2010, you needed to have 10 years. At the beginning of this Parliament, all but a few days, you needed to have 10 years, and the 2010 changes scrapped that 10. For a woman, 10 years was a quarter. The reason it was 10 was essentially 10 out of 39 was a quarter of your working life, so you had to have a 25% record. For a basic pension of 30, you might say seven or eight. Now that we are talking about 35, you might say nine. That is the kind of territory we are in; that is where those numbers come from. Once you start getting to 15 and so on, you are getting a bit nearer people who have got much more contact with the country. For example in New Zealand, if I remember rightly, it is 10 years’ residence for a citizen’s pension. That is the kind of territory that says you have some contact with the country. Push it up too much and it is getting much more exclusive.

Q186 Anne Marie Morris: At this point in time, have you any sense as to where the ceiling might be and when a decision might be made?

Steve Webb: We would stick to the sevento10 range, so I regard 10 as a ceiling. I do not envisage us going beyond that. In terms of a decision, it would be brought in regulation but, again, we would be happy as the Bill went through to be more specific about a date for finalising that. The difference between those two numbers, in practice, is marginal, to be honest.

Q187 Glenda Jackson: Can I take us back? You referred, Minister, to your regarding the Singletier Pension as being essentially fair. I think it is 453,000 women who regard it as being grossly unfair, because it is entirely dependent on their date of birth. I have already spoken about the women, but it is a much larger group than the 80,000. You have referred to some of the ideas that have been put up to you, namely that they change gender or they defer actually taking their pension. Then you went on to elucidate just how very difficult that would be. Are you seriously considering putting on the face of the Bill that there will be a choice for women in this particular group?

Steve Webb: No, absolutely not.

Q188 Glenda Jackson: It is not going to be on the face of the Bill. What does that mean? If it is not on the face of the Bill, does that mean they can defer taking it or that they can wish to be regarded as a man? If they can, where is the validity of that, if it is not on the face of the Bill?

Steve Webb: Just for the avoidance of doubt, what would happen if they were treated as being the same as a man on the same day was a kind of thought experiment to say, "What if?" We are not proposing legislation; we are not suggesting this would happen. What we are saying is, "If we went down that track, what would the numbers look like?" The numbers would show overwhelmingly that that would be a mistake; 85% would do worse than a man born on the same day with the same National Insurance record. But that is different from deferring.

They can defer now. They can defer without us legislating. In deferring, they get incredibly generous terms: 10.4% for a year. If you do the maths, if you get 10% on your pension and you defer a year, then all you have to do is 10 years at 10%, which is 100%. You can see very quickly that, if you defer, you are quids in. The 10% is overgenerous relative to how long people live. Women in that age group can get an extra 10%, another 10% and another 10% for every year they defer, and can end up above £144 in most cases, without even doing anything. There would not be anything in the Bill on either of those things, because they can do one anyway, and the other we are not proposing, just for the avoidance of doubt.

Q189 Glenda Jackson: You did say yourself that, if they defer that pension, they are told, when they actually apply for the pension, that certain credits that would have run along are no longer there.

Steve Webb: No; sorry, I may have confused the Committee. If their State Pension age is under the current regime, they have all the entitlements of the current regime, including Savings Credit. Those women, if they defer, are still nonSingletier pensioners. They get their enhancements for 10%odd, Savings Credit, derived rights and all the rest of it, under the current rules. The point I was making is if, hypothetically, we let people opt for the full package-to use my phrase-and turn themselves into men, they get the full package. They miss out on Savings Credit, miss out on derived rights and so on.

Q190 Glenda Jackson: Will that sort of information be out there for them, and when will that information start to be fed back in?

Steve Webb: One of the challenges we have is we want to get accurate information out to people that does not then change, and because this is a draft Bill and we obviously want to think about what the Committee has to say about it-and obviously Parliament will want to have its say formally-if we put stuff up now and then the Committee or Parliament suggests we change something, we have to edit it and change it. What are trying to do is get information out there. For example, if the Bill was introduced early in the next session, and had Royal Assent early in 2014, we still have three years to communicate and all of that. The point at which to do most of the communication is when the policy is settled, rather than when it is up to change.

Q191 Chair: Can I be absolutely clear? What you are saying is that you think the proposals that you have presently in the draft Bill are better for this group of women than any of the suggestions for mitigating things that could be put in place.

Steve Webb: Yes.

Q192 Glenda Jackson: Does that include the issue of the married woman’s stamp and those kinds of contributions? We have had a lot of concerns expressed to us about that. I do not know whether this is fact or fiction, but there are also concerns that there may be a removal of the pension to a widow or to a divorced spouse.

Steve Webb: On the married woman’s stamp, there is specific provision in the Bill to protect women who have paid the married woman’s stamp and might not get the basic amount they were expecting. That is in the Bill. For widows, again there is transitional provision. For example, if-I hesitate to say "prospective deceased husband"-the person you are married to has a pension under the current regime, you will be able to get a widow’s pension on his contributions, even under the new regime. There are an awful lot of transitional measures in this.

Q193 Glenda Jackson: Does that also cover divorced partners, where there may be a legal agreement when it comes to the pension rights?

Steve Webb: Legal agreements tend to relate to private pensions and so on, which we are not changing. If the person from whom you would derive the rights is a pensioner under the current system, you will continue to be able to derive widow’s rights and divorcee’s rights.

Q194 Glenda Jackson: We also had a great deal of evidence that carers, who can claim Pension Credits, do not because they do not know about it. Are you taking any steps to change that situation, and what would be the situation for them when the new system comes in?

Steve Webb: The Committee has landed upon something, if I may say so, on that issue.

Glenda Jackson: It is not unusual for us, is it?

Steve Webb: Indeed, but I have left you to say that. There is much more we can do. Let me give you an example. We write to people when they miss a year of National Insurance. It is called a deficiency notice. We say, "Would you like to pay up for that year?" What we do not do in that letter is say, "By the way, if the reason you do not have a year’s National Insurance is you were a carer, a grandparent, whatever, did you know you can get a credit for that year?" We do not do that. Of course, the people you say could get it and do not are exactly the same people we are sending these deficiency notices to.

In the light of your inquiry, we are going to work with HMRC, who send the letters out, and try to get the text of those letters changed to flag up this fact. We invented some of these credits. The previous Government invented some; we invented some. We invented them because we want people to claim them. You have highlighted the fact that many people are not, and we are not just going to sit back and let them not claim them. We are going to flag to those very people that they should do so through changing our literature, so we are very grateful for that.

Glenda Jackson: Could you put the letter in something other than a brown envelope that nobody will ever open?

Steve Webb: With HMRC on the outside of it. It is a fair point.

Q195 Anne Marie Morris: On the number of qualifying years, was the change from 30 to 35 based solely on affordability?

Steve Webb: No. Let me deal with that. Briefly, incidentally, I was asked the question about how many people were excluded by the minimum qualifying amount. If I may, briefly, broadly speaking the figures I gave for the GB population are roughly the same also for the overseas population. It is of the order of 10,000ish that we are talking about overseas, just to put that on the record. I have suddenly remembered the number.

On the 35 years, we are merging to pensions a basic pension they currently get for 30 years and a SERPS pension that you can accrue over nearly 50. In a sense, if you are averaging a 30year pension and a 50year pension, it is not unreasonable to end up with a 35year qualifying requirement. That is the first thing. It is not going from 30 to 35; it is going from 30 and nearly 50 to 35. That is the first thing to say.

The second is this is a pension for the future, in a world where we already know State Pension age will rise to 66, 67, 68 and whatever longevity takes us to. In a world where people are leaving school at 18, let’s say, and working to 68-50 years-is it reasonable to expect that for about two-thirds of that you are either paying National Insurance, caring, or looking for a job? That does not seem to be draconian for a full pension. Yes, of course it saves money, so it helps us to fund the level. There is a tradeoff here: how many years, what level and all that sort of stuff. In a world of longer working lives, paying a pension at 35, two-thirds of your working life, seems to be about right.

Q196 Anne Marie Morris: Have you done the numbers as to, if it were 30 rather than 35, what the different cost would have been to the Treasury?

Steve Webb: Yes. We tried a raft of different permutations of years, minimum qualifying years, indexation and starting levels-and I can give the Committee the exact figures in a moment-but the interesting thing is the numbers of people between 30 and 35 are not that great. Most people who are here for their whole lives tend to build up 35 and, increasingly, most women will as well. That has not always been the case. The people who do not build up the 35 tend to be, for example, what we call in the Department lateentry migrants. They are people who come to the country perhaps late in life, having worked and lived somewhere else. Although they therefore do not satisfy the 35years test and get a pro rata reduced pension, they will often bring in pension rights, assets or something from the country they were previously in. Again, for people who do not make the 35 years, it is not just the case that they end up on meanstested benefits or whatever; they may have a complex life history behind them.

Q197 Anne Marie Morris: Would you be able to give the Committee the figures, so that we can see what 30 would have been as against 35?

Steve Webb: Yes.

Q198 Anne Marie Morris: Did you look at whether or not there would have been a particular peak when it would have been particularly expensive had we gone for 30 rather than 35?

Steve Webb: Coverage is building up pretty impressively because of the crediting that is going on and because there are more women in the labour market. The costs just go on rising because of the ageing population. There is no single year. Broadly speaking, on the 30 versus 35, just to clarify, by about 2030-because these things take a while to build up-we are talking about £1 billion, give or take. That is in the context of a bill that, by then, would be well in excess of £100 billion. It is relatively marginal in terms of the overall cost of the thing.

Q199 Sheila Gilmore: You touched on some of this, but certainly there has been concern about the lack of takeup of some of the credits that have previously been introduced, for example things like the carers’ credits. Some people suggest there should be credits for volunteering activity, if people are engaging in that. How are you addressing these issues under Singletier? Is there anything more than just simply writing to people?

Steve Webb: Yes, although I do think writing to people is really very important, because we are writing to the right people. We are specifically taking a set of people who did not build up a year’s rights in the year in question and saying, "Here are some ways you can fill that gap," so they are precisely the people we are after.

There are two other things I should mention. One is having a single system of credits. At the moment, we have a list of credits for the basic pension and a list of credits for the Second Pension, and they are not the same. You would assume they would be, but there are credits for this and not for that. Even ones that have been introduced relatively recently, like the credit for spouses of people serving overseas and so on, apply to one and not the other. People get credit for one and not the other. In Singletier, a credit is a credit is a credit, at the full rate-a 35th of £144. That will help. The other thing is Universal Credit will expand the scope of crediting. For example, some of the spouses in Universal Credit will get credits when they would not currently. Some of the working households on working tax credits and housing benefits will get credits where they would not previously. In fact, the scope of crediting is being expanded.

Q200 Sheila Gilmore: Could you just explain why that is?

Steve Webb: It is because of the way Universal Credit has been set up. Because Universal Credit has expectations that people seek work and so on, if they are satisfying those and qualify for Universal Credit, we then say, "You are doing your bit."

Q201 Sheila Gilmore: If the partners have a sufficiently low income or sufficiently low hours that neither of them is actually working, you are saying that both of them would get credits under Universal Credit that they would not necessarily at the moment. Is that right?

Steve Webb: Just to be clear, being in receipt of Universal Credit will be a source of crediting into State Pensions.

Q202 Sheila Gilmore: For both partners?

Steve Webb: Yes.

Q203 Sheila Gilmore: Do both partners therefore have to satisfy conditionality for that?

Steve Webb: They do anyway, yes.

Q204 Sheila Gilmore: Will that cover more people than were covered before?

Steve Webb: Yes; we are expanding the scope of crediting.

Q205 Sheila Gilmore: What about tax credits?

Steve Webb: It has tended to be the case that, if you were working but not earning enough to pay National Insurance, there is a kind of grey area. If you are working and within the scope of Universal Credit, then you are going to be credited in. It probably might be helpful if we set this out in more detail, but the scope of crediting, because of Universal Credit, will be broader than it currently is.

Q206 Sheila Gilmore: There is a specific issue that we raised with some of our previous witnesses and that has come up over the years to previous Governments, which is the position of people who are in fact under present contribution levels, because of their level of earnings, and are not currently credited. If they do more than one job and are under on all of them-and I have got constituents in exactly that position-at the moment they do not get any credits towards their pension. Are you saying that will end with this new system?

Steve Webb: There are two sets of people. There are the people you have just described, who have multiple jobs. They are mainly women obviously. Of many of the women who have multiple jobs, one of those jobs is above the starting point for National Insurance.

Q207 Sheila Gilmore: Supposing none of them are.

Steve Webb: I understand that, but it is worth saying that, for a lot of people in multiple jobs, one of them gets them above £90odd a week. If both or all of the jobs are below, in many cases, because we have looked at the stats, that is because they are doing something credited, so it is because they have kids, they are a carer or whatever, so they are covered. We are down to very small numbers.

Just to give you a feel for it, we think that there are, in any given year, about 65,000 women with multiple jobs all below the lower earnings limit, of which about three-quarters are getting credits from some other bit of the system, so children, carers or whatever. These are slightly old numbers, but we are down to about 15,000 not accruing through any means in a given year. In Universal Credit, if they were the partner of somebody on Universal Credit, then they could be credited through that route, but they might not be. They might have a highearning spouse and not get it, so there will be some, but I think the numbers are actually tiny. I am very happy to give you full details of all of that.

Q208 Sheila Gilmore: If we are really going to have the ability to record people’s earnings so quickly for Universal Credit purposes, for example, would it be very difficult to simply create a mechanism to credit these people, since they are so few in number anyway?

Steve Webb: I think it is the opposite. This concerns perhaps 10,000 to 15,000 people, who probably do not spend long periods in multiple jobs. The data are limited, but there is usually a reason why they are doing multiple jobs below the lower earnings limit, which will not necessarily be permanent.

Q209 Sheila Gilmore: Maybe they cannot get any other jobs.

Steve Webb: That may be, but if they are on Jobseeker’s, for example, they would get credits. To redesign the system for 10,000 to 15,000 would be massively complex. All I would say-and I do not mean this to sound how it might-is be careful what you wish for. As soon as we add their wages together, somebody somewhere in Government might say, "Oh, you have combined wages above the National Insurance floor. We would like some National Insurance, please." So a) it would be very complex for a very small number of people, and b) there might be unwanted side effects.

Q210 Sheila Gilmore: People already have to pay tax on their income.

Steve Webb: Not if they have multiple jobs below the lower earnings limit.

Sheila Gilmore: Yes they do.

Steve Webb: Only if they get to £10,000, which would take several jobs below the lower earnings limit.

Q211 Sheila Gilmore: You would expect to accumulate for incometax purposes.

Steve Webb: It is taxable, but if all they have are two jobs, one paying £5,000 and one paying £4,000, they would not pay any income tax. National Insurance is done per job at the moment. If we started adding them together, someone might start saying, "Well, let’s collect National Insurance as well."

Q212 Glenda Jackson: Could I just ask where this information is going to come from? When Universal Credit comes in, is this information going to come from HMRC? We have already had a great deal of evidence, with regard to lowpaid workers, that the smaller employers are going to find the realtime exchange of information very difficult. We have already heard that there are still issues about to whom the actual payment of Universal Credit is made in two-working households, where I think the presumption is being made that the lower earner is the woman. Where is the information coming from, as far as setting up a back record of qualifying for a State Pension? Is it HMRC?

Steve Webb: Just to be clear, if I am a woman in lowpaid work, we have a whole mechanism already in place for monitoring all this stuff: child benefit recipients, records of paying National Insurance and so on.

Q213 Glenda Jackson: They are all going under Universal Credit, aren’t they?

Steve Webb: No. Credits for child benefit are staying and so on. In many ways Universal Credit will streamline all this stuff, because you will not have tax credits here, Jobseeker’s there, housing benefit there. It will all be in a single system.

Q214 Chair: You do have the problem of the people who are over the higher rate income tax and have not taken their child benefit. How will they be credited?

Steve Webb: There are two sorts of people there. First of all, we have what you might loosely call the stock-people who are already in the child benefit system who, because a spouse or a partner is on a high wage, opt to get zero child benefit. As long as that is what they do-they opt to get zero child benefit-there is no problem, because zero child benefit credits you. As long as you are on the system, you get the credits, even if your child benefit is reduced to zero.

The challenge would be firsttime mothers. What we have done there is put information in the Bounty pack that new mothers get that specifically says, "Even if you have a highearning partner or spouse, claim your child benefit, even if you get a nil award, because it protects your pension record." The early evidence, and it has only been going since January, is there has not been a dropoff in the numbers of people getting credits for child benefit. There is no sign yet that there is a problem.

Q215 Stephen Lloyd: What does that group get currently? From the pension perspective, for that particular group, what is their current position?

Steve Webb: For children under 12, you get credits towards basic and State Second Pension. That will essentially continue.

Q216 Stephen Lloyd: I mean the group with two or three jobs, all of which are under minimum thresholds.

Steve Webb: They get nothing.

Q217 Stephen Lloyd: They get nothing. So we are replacing nothing with nothing and trying to minimise that nothing, if that makes sense.

Steve Webb: As I say, it is a narrow group, and Universal Credit may pick some of them up as well.

Q218 Stephen Lloyd: It would be of value, probably, for us to see any modelling the DWP has done on that. Again, this is an issue that comes up. I am aware it is a much lower number than perhaps is out there in the ether, but I would be interested in seeing any modelling on that so we actually have some statistics. It goes back to what I was saying earlier. One of the biggest challenges that I have identified in this, both through the Committee and as an individual MP, is that because of the noise that is out there around STP, many more people think they are losing out than are. That keeps coming again and again. I understand that you cannot do a huge drive on that yet, because we have to get the Bill through Parliament. It needs all the things that we are talking about, but it is a real problem. Even with this group, which is an even smaller group, that has also been painted as a bigger problem than it is. There is also a perception that the Department is not taking the steps that you have already mentioned. Again, I come back to the communications side.

Steve Webb: Sure, and it is worth stressing that you could spend 15 years of your life doing multiple jobs under the lower earnings limit and still get a full Singletier Pension if the other 35 are credited or spent working. It is not like one, two or three years spent doing this necessarily makes any difference at all to your pension. It would have to be a really prolonged period and, frankly, there is usually a reason for that.

Chair, if I may, could I slightly correct something I said earlier on about divorce, just to make sure we get the records straight here? I got it the wrong way round. I have to tell the truth here, just in case anybody is listening. If a wife is a pensioner in the current system and the husband is a Singletier pensioner, they retain access to derived rights. It is that way round, not the other. I think I may have said it the other way round.

Chair: We should have picked you up, because we did know that. Sheila still has some questions on this.

Q219 Sheila Gilmore: You raised the issue that, if you accumulated people’s bits of earnings, they would have to pay National Insurance contributions.

Steve Webb: Somebody somewhere might think that they should.

Sheila Gilmore: Actually, that might well be fair. Certainly one constituent who raised this with me very recently said that she had asked if she could do that, and she was told she could not.

Steve Webb: She could pay voluntarily anyway. You can pay voluntary NICs any time you like.

Sheila Gilmore: She had obviously not been given that information.

Steve Webb: No. To be honest, you have six years to do that. It may not be the right thing to do. Often with voluntary NICs, seeing if it turns out to have been the right thing to do is the best strategy.

Q220 Sheila Gilmore: To come back to that particular point, whether you have 35 years is presumably going to be something you will not know until you are potentially quite close by. If people perhaps stay in education until they are 21 or 22, before they actually start paying anything, and maybe then have some time out and so on, you are going to be in the position where it is some time before it is clear to you that you have reached that level. How flexible is the voluntary contribution going to be for people to be able to pay NICs up if they choose to do so?

Steve Webb: I entirely agree with that. Our colleagues at HMRC laid regulations before the House on 27 February, if I recall correctly, that relax the time limits. What we are saying is, at the moment, you can go back to 200607-six years. We will let people go back to 200607 as late as 201819. We will let the ability to go back run on for much longer, because it is all changing. We want to give it time to settle down, get the information out there and people still to have time to make decisions about voluntary contributions. We think six years would be too tight. Not only are we relaxing the rules; we are also allowing people to pay at this year’s rate, not whatever the rate has got to by the time it gets to 2018 or whatever.

There is quite a lot of flex. I must admit, I am quite startled by the amount of flex that has been built in on that front. We will be putting in information over time, so that people can log on to a website, see what they have built up so far and see what would happen if they built up extra years. Because it is much simpler in the future, we are going to try to make that available to people.

Q221 Sheila Gilmore: Would that be available on an ongoing basis?

Steve Webb: Yes, that is the intention.

Q222 Chair: Could I just ask about Universal Credit and the fact that there will be realtime information? Would that not act as the answer to the individual with three tiny micro jobs, none of which gets them the credits?

Steve Webb: It would certainly help. Yes, that is right. As I say, the question is, because we are talking about very small numbers of people and we currently do National Insurance per job, we would have to rewrite quite a lot of stuff to cater for what is, I think, a very small number of people who possibly have no detriment anyway. They can have 15 years off for good behaviour and still get a full pension. You could end up rewriting a lot of stuff, at a time when we are rewriting everything that moves, all to cater for a very small number of people who may not be losing anything anyway.

Q223 Chair: Just before we finish this section, I think you said there were between 10,000 and 12,000 UK nationals who would not get a State Pension if it was a 10year qualifying period. Who are these people?

Steve Webb: They are quite diverse. For example-I hesitate to say this-you could have served a long time in prison. We do not credit National Insurance for prisoners, so that is one example. As I say, you could be in Britain now, but not necessarily have spent much of your life here. There is a diverse range.

Q224 Chair: Would it be the wife who has not worked, has not had any children, has not done any caring and has been at home the whole time?

Steve Webb: It could be, yes.

Q225 Chair: What if the wife has a disability, and her husband is the carer and has all the carer’s credit, and she has never gone to sign on, got ESA or anything?

Steve Webb: We would not know about her unless she had claimed.

Q226 Chair: There must be people the system does not know about.

Steve Webb: Yes. Bear in mind the safety net of Pension Credit in all of this. A single person who gets to pension age with nothing and no savings gets £142.70 in today’s money anyway. The couple gets £200odd. It is not like they are destitute; there is a safety net still in place, and we envisage that there always will be.

Q227 Stephen Lloyd: The starting rate and uprating have also been ongoing issues that have cropped up. As you know, the starting rate for STP is £144, which is only marginally above the Pension Credit guarantee rate. The Green Paper proposed a more generous rate. Is there not a risk that many pensioners will be just £1.30 above the meanstesting level, yet in exchange for that small amount will lose much more because they will not be passported to other benefits?

Steve Webb: You have to remember that this is a complement to automatic enrolment, so unless people opt out, they will reach pension age-assuming they get a full Single-tier Pension-with £144, which is that illustrative figure, plus the pension that a minimum 8% contribution from employer, employee and tax relief gets you. They will not retire on £1.30 above the Guarantee Credit; they will retire on £144 plus an autoenrolment pension in the vast majority of cases. They will feel the benefit of being clearer of meanstesting than just from their State Pension income. That will be the norm in future.

But you are right: there is an issue about passporting. Different Government Departments do passporting, not just us. There are issues that you would have to think through. We have had to reinvent the entire passporting regime for Universal Credit, and clearly we will have to think through whether there are knockon effects for pensioners that we need to think about. We have not specifically proposed any changes, but you are right. Some passported benefits are tapered, which would not be a problem; some are cliffedged. Coldweather payments would be the obvious one. It would be a potentially adverse effect that pensioners who are a few quid above would not get coldweather payments while those who are a few quid below would. There is a cliffedge at the moment. As you say, there are knockon effects of this, and we have had to think them through for UC and there is probably more work to be done on the pensions side.

Q228 Chair: You can maybe tell us what conclusion the Government has reached with regard to UC, then, because we have not heard.

Steve Webb: I think that one is above my pay grade.

Q229 Stephen Lloyd: Why not have in the Bill that the STP rate is always going to be above Pension Credit? Secondly, after a transitional period, why not look at it being 5% or even 10% higher? There are two issues there.

Steve Webb: Bear in mind that the statutory indexation of the Guarantee Credit is earnings and the White Paper assumes that the triple lock will apply to the single tier. Over time, we think the triple lock is more generous than earnings indexation, so there would be an enhanced indexation of the single tier relative to the Guarantee Credit. Even if they were uprated by the same percentage, the cash amount would grow, because the single tier is a bigger number, but the average percentage increase on the single tier will be bigger than on the Guarantee Credit. The cash amount will be £1.30 in today’s money, illustratively, but would grow every year.

Q230 Stephen Lloyd: Essentially what you are saying is, because of the triple lock, inevitably, over a period of time, it is going to expand further away from Pension Credit.

Steve Webb: Yes, based on the assumptions in the White Paper.

Q231 Jane Ellison: Picking up on that point, I want to talk a bit about the interaction of the Single-tier Pension with some of the meanstested benefits. The IFS particularly has highlighted this idea that, over time, it becomes less generous because of the way the two interact. Can you comment on that particularly?

Steve Webb: It would be lovely to get rid of meanstesting for pensioners altogether, but until we solve the problem of housing costs for renters, housing benefit will still have a significant place for lowincome renters in retirement, and unless we want to stop giving severely disabled people extra money in retirement, disability premium and so on will remain a part of the system. We cannot slash meanstesting, but what we are doing is accelerating the speed at which meanstesting reduces. There is a builtin tendency for meanstesting to become a smaller part of the system already; we are giving that more of a push. One of the things, for example, is that fewer pensioners will be on multiple meanstested benefits, which has got to be a good thing. But, depending on what happens to council tax support, there will be plenty of pensioners on low incomes still at least getting help with council tax. My view for today’s pensioners and tomorrow’s is we want less meanstesting and more basic pension. We are doing that with today’s pensioners and we will be doing it with tomorrow’s.

Q232 Jane Ellison: Do you recognise the figure the IFS gave us of, in some cases, a 100% marginal withdrawal rate?

Steve Webb: If you do not have a full Single-tier Pension, so you are below £142.70, then the first few pounds might be at 100%. But in a world of automatic enrolment, unless you have opted out, you have got that on top, so any discretionary saving above the automatic enrolment minimum would be much less likely to be facing a 100% marginal rate. We have published some statistics, which I imagine the Committee has had but we can send them again, that show that our reforms are particularly beneficial on the marginal rates of the low-paid. That is the group that gets the biggest improvement on marginal rates. If we have not sent it to you, I am very happy to do so.

There is a particularly nice twist to all of this, which is if you are on Universal Credit, 100% of your pension contributions are disregarded for Universal Credit. If you put £3 in to a pension, you get £2 back off Universal Credit. It costs you £1, but you get £6 because your employer is putting it in in tax. This is another way what we are doing is incentivising lower earners to save.

Q233 Stephen Lloyd: We had a chap from IFS in front of us a week or two ago. How would you respond to one of their oftquoted conclusions that by 2050 or 2040-I am not exactly sure which-the lowest earners will be worse off under the Single-tier Pension? How would you comment?

Steve Webb: We have produced figures for 2020, 2040 and 2060 and, funnily enough, the overall package gets more progressive as you go through. In the early years, the distribution impact is fairly flat because of a lot of the transitional stuff, but in the longer term, if you think about the logic of it, we are paying a flat pension, not an earningsrelated one, so by definition lower earners within any given budget would be lifted up and higher earners would fall.

It is true we are paying less than we would have done; we are reducing the rate of growth of the scheme. But as one of your witnesses said, all of those counterfactuals assume that otherwise nothing would have happened. If these very large costs as a share of national income are coming down the track, plus healthcare and social care costs, assuming no other government would have done anything is not the right counterfactual either, it seems to me. In comparison with what might otherwise have happened, I suspect we are doing better by lower earners than many other things we could have done.

Q234 Debbie Abrahams: It was not just the IFS, with respect; it was also the PPI. We need to be clear now. Again, I am not as au fait as you are with the collective work that is going to be affecting the final pension pot that somebody may have. We need to be very clear about that. Their assessment was based on the Single-tier Pension and how that compared with the current State Pension. What you are saying, Minister, is that collectively, with the different things-autoenrolment, the STP and other measures-you think they will be better off. We need to be very clear about that. It would be quite misleading to suggest otherwise.

Steve Webb: I agree. As I say, as the decades go by, our distribution charts, from being flat, tilt towards the lowerpaid doing better relative to the higherpaid. Our distribution charts look better, in my terms-and perhaps yours-as time goes by. Clearly we are not spending as much as we would have done. I am not hiding from that. By the middle of the century, we are spending nearly 0.5% of GDP less than we would have done. That is not a secret. What we do not know is what would otherwise happen if we do not rein in costs in this way; it could have been done in a much less progressive way than the way we are doing it.

Q235 Jane Ellison: Can we pick up on another group? It was put to us that disabled pensioners are potentially more likely to be affected by the interaction between meanstesting. Can you comment on that?

Steve Webb: That is right. If you are disabled and drawing on Pension Credit, you would also get a premium on top, so it is harder, then, to get clear. For somebody who is disabled from birth, or something like that, and not working, frankly, the issue about marginal deduction rates and workplace savings just does not arise. The dilemma is I do not think many of us would want to significantly reduce the support we give to older disabled people. There are arguments about streamlining the system, but unless you take money away from older disabled people, inevitably they need more to get clear of the meanstested support you have just given them. That is the tradeoff.

To come back with a hard fact for Debbie Abrahams, by 2040 we think that 60% of the lowestincome pensioners will see their incomes increase compared with just rolling forward the current system. By 2040, 60% of the lowestincome pensioners will be getting more under this system than under rolling forward the current system.

Q236 Debbie Abrahams: Can you explain, then, why there is this discrepancy with the analysis of both the IFS and the Pensions Policy Institute? Why are your figures so different from theirs?

Steve Webb: There are two reasons. One is that they say long term and, by long term, they mean after I am dead. They really do mean long term. The other is the difference between the stock and the flow. In a sense, what they are saying is a newly retired pensioner in half a century will be getting less than they would have done. That is absolutely true. I am talking about all the people who will be pensioners in that time. We will still care about 80yearold pensioners in 2050; we do not just write them off. So, the other reason is that it is partly the difference between the stock and the flow.

Q237 Jane Ellison: You have already touched on housing benefit. Can we just pick up on how you envisage the arrangements for that ongoing support being managed, and if they are going to be in the regulations?

Steve Webb: Part of the way we pay for single tier early on is scrapping the Savings Credit for new pensioners. There is an amount in the housing benefit allowances for the maximum Savings Credit. The idea was that, when Savings Credit was paid, you did not want that all to be clawed back through housing benefit, so there is an amount in the housing benefit thresholds for the Savings Credit. The risk was, if we scrapped the Savings Credit and then reduced all the housing benefit thresholds by that amount as well, we ended up with a large number of lowincome losers, and we felt that was too brutal. What we have said is, for a transitional period of the order of five years, we will keep that element in the housing benefit premia. That takes us to 2022, which will either be my 12th year as Pensions Minister or possibly somebody else’s. It would be fair to say the exact mechanisms of how that unwinds at the end of that fiveyear period and how we transition to the new is work in progress.

Q238 Jane Ellison: You said "of the order of five years".

Steve Webb: It will be a Parliament’s worth-that sort of timeframe.

Q239 Jane Ellison: Understood. Finishing on that point, the Pensions Policy Institute has been mentioned already. They reckon that a third of State Pensions would remain eligible for some sort of meanstested benefit under the single tier. Is that a reasonable assumption that you recognise?

Steve Webb: It is not far off, but it will decline. What will happen is fewer will get multiple ones-Pension Credit and housing benefit and council tax benefit. That will decline over time, but not as fast as we would like. As I say, some of them will be getting fewer multiple benefits. Some of them will only have very small entitlements, and therefore if they save a bit voluntarily, they are clear. It would be lovely to do all this overnight, but you are trying to deal with a lifetime’s worth of undersaving, which you cannot fix close to pension age, so you have to have this still part of the system. By the middle of the century, we are down to about 5% on Pension Credit.

Q240 Anne Marie Morris: What was the strategy for the selfemployed? It would seem that the selfemployed come out of this doing rather well. Is there a phase two, in which you are expecting there to be a change in the NI contributions to equalise them between employees and the selfemployed?

Steve Webb: There are no plans that I am aware of to change the selfemployed contribution rates. One of the things that surprised me a little bit is that lowearner selfemployed pay more National Insurance currently than waged lowearners do. It is only a few pounds a week, but you pay Class 2 at £5,000 or £6,000 a year, whereas you pay very little National Insurance as a wageearner at that point because the first £5,000 or £6,000 is ignored and you pay it on the balance. You have to be over £10,000 a year to pay more as an employed earner than as a selfemployed person. Lowpaid selfemployed are not favourably NI’d.

The selfemployed have always been a problem for pensions policy, because the selfemployed are not in the scope of automatic enrolment. About 10 years ago, my predecessors commissioned a report on the selfemployed and pensions, and it looks very nice on the shelf where it was left. Nobody knew what to do. At least what this report will do is bring the selfemployed into the scope of the full pension, not just the basic pension. I always tend to think there are two sorts of selfemployed people: there are people who have done really well, whose business is their pension and who have planned; the other set of people is the lowearning selfemployed, who perhaps a generation ago would have been contractually employed, who now have no access to workplace pensions and low State Pension rights. We are at least doing something about that group.

Chair: On the thorny issue of contracting out, Nigel.

Steve Webb: Is it thorny?

Q241 Nigel Mills: It is the one you are laying the regulations on early, so there must be something in there. We are in the situation where private-sector employers will end up with the right to amend their pension-scheme rules without having to get trustee consent. The TUC has concerns this might represent a significant risk for some individual members, presumably if the pension schemes see this as a chance to sort out a whole load of issues, or maybe add some stuff on top. Is that a concern you think is realistic? Is there anything that can be done to make sure that these changes only really compensate for the reduction in the contractedout NI that is going in, rather than anything else?

Steve Webb: It is not even in regulation; it is on the face of the Bill that you can only offset what we have cost you in lost National Insurance rebates by reduced accruals or increased contributions. It is a oneoff ability, you have got to do it within five years, and it can only be up to the amount that you have just lost through National Insurance rebates. It cannot be a backdoor way of doing more. That is the first thing to say.

The second thing to say-and this is a slightly crude and simplistic way of putting it-is that, on the whole, these employers are the good guys. These are the people who are still running final salary pension schemes. If they were out to do over their employees, they have had plenty of chance to shut the scheme or slash their contributions. They do not need my permission; they could do it tomorrow. On the whole, these are the employers who have stuck with pretty good pension schemes, and I think most schemes will not say, "Steve Webb has given us a big stick"; they will sit down, talk to their employees, talk to the trustees and sort it out. We have given them a backstop and a reassurance, and employers told us in no uncertain terms they needed that reassurance, but in most cases we do not think they will rely on it; we think they will just offset it against accruals, if they want to do so.

Q242 Nigel Mills: While the Bill gives the protection in total that you cannot try to sneak more in than the actual increased cost, is there a bit of a risk that different groups in the scheme might get disproportionately affected, so while globally there will not be a problem, for some individuals in schemes there might be?

Steve Webb: There could be a differential impact, because the only protection we have put in is that the total cost can offset the loss of the rebate. All I would say is: as you well know, firms do not have to offer company pension schemes at all. They are not in this to do over particular groups of employees; they do this because they value their employees, because they want to retain them and because they want to recruit them. It would be very odd to then say, "Great; we have got this backdoor way of being really mean to a subset of our workers." I do not see that as a particular risk, to be honest.

Q243 Nigel Mills: You do not see a role for The Pensions Regulator in overseeing what is happening here.

Steve Webb: The law will be clear. An actuary will, no doubt, sign off the amount saved as in line with the legislation. As I say, on the whole, these are the good guys.

Q244 Nigel Mills: Can I take you to the contrast between what will happen to private-sector employers and public-sector employers? I think the assurance given is that there will be no additional contribution requested from public-sector employees as a result of these changes. You can see that some people would regard that as being a bit unfair, and there will clearly be some funding issues for the employers concerned. What are your thoughts on that?

Steve Webb: There are two issues about the relative treatment of the public and private sector. As you say, public-sector employers, because we have given a 25year promise, will not change the accrual rates or other features of their schemes. Public-sector employees will face a National Insurance increase, like previously contractedout private-sector employees will. Of the employees who pay more National Insurance, most will be in the public sector, because that is where most of the residual contractingout is.

But we have done something else that benefits more private-sector employees than public-sector employees, which is what we call "something for something". While it is the case now that most of the people who are contracted out are public-sector workers, a couple of decades ago it was the other way round. The big British industrial firms all had contractedout final salary pension schemes. The majority of the contractingout was private-sector contractingout. We have allowed in the single tier people who have been contracted-out-more private than public-to wipe off some of that past contractingout history and build up towards a full pension anyway. We call that "something for something".

Whereas under the current system that past history of contractingout was like a stain on their pension record, which was there forever and could never be got rid of, under our proposals you can work off that less NI you paid through future years of work, and that will benefit people with more of a private-sector history than a public-sector history. There are differential impacts for different groups, and simply, having made the promise on public-sector pensions, we did not feel we could then rip it up before the legislation had even got through Parliament.

Q245 Chair: I do not think anybody said contractingout would be good for DB schemes, but we got contradictory views on whether it would be yet another nail in the coffin of DB schemes or whether it would not have much effect on them. I have to say that NAPF and CBI thought it would be marginal. What is your own view?

Steve Webb: Again, I keep coming back to this thing that there is a reason why the guys who have survived are still doing it. The big employers who have kept salary-related pension schemes are doing it because it is part of the package; it is something that employees value; and it is a recruitment and retention tool. While they could use the opportunity of the end of contractingout to get rid of that kind of pension scheme altogether-and some may choose to do so-frankly, this coffin has got enough nails in it already. If they wanted a reason, they have had plenty. If they are still going now, this will have some effect, but I do not see it being seismic.

Q246 Chair: These changes might not have an impact on DB schemes, but are there other things coming down the track that make you think this is moving towards the end of DB schemes?

Steve Webb: Certainly Insolvency II would be a pretty big, fat nail, which hopefully we can see off. We ought to briefly mention Defined Ambition in this context.

Chair: Indeed, that was my next question. Carry on.

Steve Webb: As and when firms finally give up on this sort of provision, what we want to avoid is that they just swing to minimalist DC. What we want to do is say to them, "You may not want, in a contractedin world, full exposure to all the costs and so on of DB, but here is a regulatory regime and a set of models that give your employees something that is more than core DC." This is our opportunity, while firms are thinking about future provision, to catch them on the way rather than let them go to the other extreme.

Q247 Chair: But you would have to have something in place by 2017, wouldn’t you?

Steve Webb: Yes.

Chair: To be honest, your plans for Defined Ambition are a bit vague at the moment.

Steve Webb: I am mortally wounded by that suggestion. We are working nonstop on them. I saw the front page of the Daily Express was covering Defined Ambition today, which I thought was a good sign. I take your point. Because of autoenrolment and the end of contractingout, big firms are doing a lot of big thinking about longterm pensions. We need to be ready for them as fast as we possibly can, and I entirely accept that point.

Q248 Graham Evans: Many witnesses have told us that the key challenge for the Government is ensuring that it communicates effectively with the public about what the changes will mean in terms of both individual entitlement and overall impact-"it pays to work, it pays to save" I think is the mantra. What will the main characteristics and timescale be for the different elements of your communication strategy?

Steve Webb: Clearly, as I say, what we really want to do is be able to give people information that we do not then change every few years. Until we have got Royal Assent, which, all being well, could hypothetically be this time next year-that sort of timescale-we will still be up to three years ahead of when we might bring the thing in. That gives us time. As I say, there will be different communications for different people, and we can link it with the automatic enrolment communications as well. For example, we work with employers to do something called combined pension forecasts. Quite a lot of bigger firms provide company pension information and State Pension information on the same piece of paper. One of the things we are working on is not to disrupt that; where employees are getting information about their state and private pensions in the same place, we are facilitating that. That is the first thing.

I mentioned earlier our intention to have a lot of internet access. At the moment, trying to find out what your pension rights are and what they would be in different scenarios is incredibly difficult. It is much easier in a singletier world. You will have a foundation amount from 2017 and then so much a year until you retire. It will be much easier to have-I hesitate to say this-a Wongastyle sliding scale: you move it along X extra years and "this is the pension you will get". Ultimately, making it simple, most people will get a full 35 years and most people eventually will get £144. The communications will get an awful lot easier, but we have got a lot more thinking to do on exactly how we do all of that.

Q249 Graham Evans: The National Association of Pension Funds suggested that DWP should have acted sooner in informing the public of the changes about to happen, because there is already misinformation and misunderstanding of the changes that are going to be happening, certainly about potential losers, as some colleagues have alluded to. Should you have acted more quickly, do you believe, to communicate the changes?

Steve Webb: The dilemma you have in Government is that you cannot spend money telling people about things that are not in place. We are not allowed to spend money telling people what this new single tier will look like, because Parliament has not approved it yet. There is a tradeoff. There are times when you can do stuff once Second Reading has happened-and you have to get special approvals to do even that. We certainly want to get on with it as soon as we can, but we are slightly constrained in that.

Q250 Graham Evans: I agree with that, and I appreciate you cannot spend money before it is on the statute, but just thinking ahead, are there groups of people you have got in mind who you really do need to be proactively informing that they will not get something they currently think they are going to get?

Steve Webb: It is worth stressing that there is a lot of protection in the new system. When we do the 2017 foundation calculation-or whenever it is-we will take what someone would have got to date under the current system and what they would get under singletier rules, and start with the higher of those two numbers. In most cases, people will get at least what they thought, if not more. There are exceptions. Some of the derived rights cases we were talking about would be one, as would people who have got five or six years, or whatever. There are particular groups who we could think about, but relatively few people will get less than they thought they were going to.

Q251 Stephen Lloyd: On that basis, Minister, coming back to the old sore I have been talking about, I appreciate that until it has got Royal Assent and been signed off, we have challenges around communication, but I think many of us around the table would say that an awful lot of people have the wrong end of the stick. Perhaps there is a way around it whereby some of the key grassroots campaigners, or IFS or what have you, can do some more work sitting down with some of the groups who may be putting out a more negative picture than the reality. That might be something worth considering. I appreciate you may have to wait another year, but I can tell you here and now, speaking from my perspective, that not as many people as should do realise-I am putting my cards on the table; you know I have supported this for a long time-that this is an incredibly good, progressive step, and so I would not wait a whole year for some of those groups that are rubbishing it.

Steve Webb: I would not want to give the impression that we do not engage extensively with what, in the jargon, are called stakeholders. If you think about the evidence you have got from everyone from Ros Altmann to Age UK, Baroness Hollis and so on, it is overwhelmingly supportive of the principle. That is partly because they are good people and partly because we have spent years talking to them about these things, but I am not at all complacent; I agree there is an awful lot more communication still to be done.

Q252 Stephen Lloyd: I would agree in the round that, while there will be areas in which all of the groups you have mentioned have concerns, they have completely understood the progressive upside. However, a number of other key ones do not and have not.

Steve Webb: For the long term, now that financial education is going to be on the school curriculum, in 50 years’ time it will all be sorted.

Graham Evans: A constituent came into my constituency talking about this, specifically to tell me that she had been off for 15 years bringing up her children and she knew exactly where she stood and what she has to do to make sure that she has a comfortable retirement.

Q253 Nigel Mills: There is one particular group of people who really struggle to work out where they are, and that is people who have had some years of contractedout who will get some kind restriction, which I am not sure we know the calculation of yet. I had one write to me this morning trying to work out if he is better off or worse off; I think it might take me quite some time. When are you actually thinking you will be able to write to people to say, "Your foundation amount is going to be X"? Is that going to be March 2017? Are you going to try to get that as early as you can?

Steve Webb: If we had Royal Assent this time next year, we would then be able to supply people with the information. We would not wait until 2017, for example. Obviously everybody of working age potentially has a foundation amount, which is 40 millionodd people, so we are not going to write to them, but what we will do is, over time, make the information available online so they can just go online if that is the way they want to do it. As you say, the key number will be your foundation amount. Obviously you will not know until 2017 what it is, because you have still got some years to build up towards it. People will know what that number is, they will see what they have to do to add to it, and the communications will get a lot simpler. I am aware at the moment that you have to go all over the place for information about the crucial issue of buying voluntary contributions, for example, which will be a crucial question for many people; we want to make that all in one place.

Q254 Nigel Mills: I thought the Government was going to start writing out to us all with a tax statement every year telling us what tax we had paid and how it was being used. You would think the same envelope could have "here is your pension entitlement" in it.

Steve Webb: Yes. We might need a few computer systems to talk to each other a bit.

Q255 Chair: Isn’t it as basic as most people having no idea whether they have been contracted out or not? They may have been contracted out, back in and out again if they have had quite a chequered employment history. Is there any way, even now, that people can find out that simple, basic information about their own situation? That might help to allay some of the fears, particularly in the group of women that we are talking about. They have just seen the statistic that they are going to get £107 as opposed to £144. Actually, they are not going to get £107, because there are all sorts of other things they might get, but they have no idea and there is no way they can find out. I was trying to do something with my sisterinlaw and I got confused. I think I confused them more than I solved it.

Steve Webb: You can get a State Pension statement now. We have stopped calling them "forecasts", but essentially they tell you what you have got so far and have some illustration of what you could build up to. It is very important to stress the scale of all of this. We are talking about everybody of working age. We are talking about 40 million people, with all their complexity. Initially, it is going to be people who want to know who will be able to find out, but what we want to do is get to a situation as quickly as we can where it is really easy to get the information for yourself. I take the point on contractingout. The reason this is not as clean and easy as it should be is because we have to be fair to the past, but try to transition out of the past and not leave it as part of the system for another 50 years. That has been the biggest complexity we have faced.

Q256 Chair: The answer is no, then.

Steve Webb: The answer is yes. You can get a State Pension statement now.

Chair: But it is often not the State Pension that would-well, I suppose it would inasmuch as they have not got more than £107.

Steve Webb: Yes.

Q257 Graham Evans: Further to my colleague’s point, we all look at our wage slips. Everybody gets a wage slip. You could put a statement in there. It currently says how much has been taken out and how much has been put in by the employer, so the figures are there. On an annual basis, it clearly brings up the pension figure, and perhaps that could be incorporated onto a pension slip or, failing that, just a website: "Go to this link to find out." The technology has got to be there.

Steve Webb: You would think, wouldn’t you? I have a funny feeling I am overpromising, but we do aim to have a websitebased solution, certainly sooner rather than later, in a way that you just do not now because it is too complicated. That is the goal.

Q258 Graham Evans: Can we go on to frozen pensions? You are well aware of the strong feeling of some UK pensioners living in certain Commonwealth countries whose UK State Pensions are not uprated when those in some other countries are. How many UK pensioners are affected? How much would it cost to uprate their pensions each year?

Steve Webb: In terms of costs, we are talking of the order of £650 million, if we started now paying the pension that would now be in payment if it had never been frozen. I hope we have already supplied you with statistics on the figures by country, but I am very happy to give you that in a moment. The main countries we are talking about are Australia, South Africa, Canada and those sorts of countries. This is quite a complex issue. There is this assumption that people live in Britain all their lives and then retire to Australia, but quite a lot of the British pensioners in Australia went there 20 years ago, or whatever it is, and spent quite a bit of their lives in Australia. As you will know, we have not changed the rules; the rules have not changed for decades and decades and decades. It has been the situation-it was the situation when they left-that their pension in payment would not be increased. The difficulty we have faced is that we have been trying to take £12 billionodd out of the benefits budget for people who are living in this country. Of course I can see it is a pretty odd system we have ended up with-anybody can see it is a bit odd, this country and not that country-but if we then said, "We need £650 million for British people who have retired to other countries so that we can make the rules more generous than they were when they left," would that be the priority for £655 million?

Q259 Chair: The thing that makes them feel there is an injustice here is the fact that in the Commonwealth countries you are frozen, but you can be in other countries and it is not. The anomaly really annoys them a huge amount. If they had only emigrated to some other country, they would have still had an uprated pension.

Steve Webb: I am not sure I can add much more.

Q260 Chair: What is going to happen under the new system?

Steve Webb: We will carry on the current arrangements. We are not changing them.

Q261 Chair: If they have already got the £144 built up and they leave with that, it will stay at £144 and that is it; that will never increase.

Steve Webb: Yes.

Q262 Chair: Will that be true for all countries, or still these same countries?

Steve Webb: There is a very detailed and slightly obscure clause in the Bill-I think it is clause 18-that is about increments on these pensions, so we are making a tweak on that. But the basic principle is identical: the same countries. About 90% of the people we are talking about are in four countries: Australia, Canada, New Zealand and South Africa. Those are the big four, essentially.

Q263 Chair: They feel that, when you were an Opposition minister, the things you said suggested that you were sympathetic to their cause and that you might try to do something about it.

Steve Webb: Let me address that in two ways. First of all, of course I am sympathetic, but sympathy butters no parsnips. At the time when we were debating those issues, the public finances were in a vastly more healthy state, but even then the previous Government decided this was not a priority. At a time when hundreds of billions of pounds were flowing in and spent on other projects, this group was not prioritised by previous Governments. When I stood for election in 2010, I stood on a manifesto that costed the things I was promising people I would do; I did not promise a penny to a frozen pensioner. There was no promise in the manifesto on which I stood in 2010 to frozen pensioners at all.

Q264 Chair: You seem pretty firm in your views. I know that the pensions industry and employers are keen to see the regulations on contractingout, and I understand that you hope to publish them before the Committee stage of the Bill in the summer. Other regulations, which contain many of the crucial details, affecting all 48 million workingage people, will not be available until much nearer the implementation date. Why is this?

Steve Webb: We have prepared a document-I am not sure if we have published it yet-that we will send to the Delegated Powers and Regulatory Reform Committee, which looks at what is in primary and what is in secondary. We have gone through every single regulationmaking power in the Bill and looked at what is affirmative, what is negative, what is on the face of the Bill and what is not. I have looked through that in quite some detail, at each of those decisions.

The dilemma is that, because things change so much in the world of work, my view is that everything affects somebody’s pension outcomes: their work; their marital status; how long they are going to live; which part of the country they are in. Pensions are affected by everything. If you hardwire a lot of stuff in primary pensions legislation, then when you just want to have some flex because something in the environment has changed and everything affects pensions, you have not got it. People keep complaining that we are constantly passing pensions Acts; that is partly because we have to keep changing the primary legislation we passed a few years ago. What we are trying to do is strike a balance. The structural framework is on the face of the Bill, but the details-we can argue about what is a detail and what is not-are in regulations and the important details are in affirmative regulations. That is the balance that we are trying to strike.

Q265 Chair: One of the concerns is that, while primary legislation undergoes a lot of parliamentary scrutiny, both in the Commons and the Lords and, indeed, what we are doing in terms of prelegislative scrutiny, the regulations do not. They are generally either an SI or a DL that last an hour and a half, cannot be amended and go through on the nod very quickly. Very rarely does it last an hour and a half. Where is that parliamentary oversight and scrutiny going to happen on what is the nuts and bolts that will make this whole thing work?

Steve Webb: I feel I am partly looking at it. Part of it is prelegislative scrutiny, so that we try to get the thing right; then there is the whole legislative scrutiny. Let me give you a counterexample. A couple of weeks ago, we did some affirmative regulations on the NEST Order. Back in 2008, everybody said, "We have got to have all this stuff. We do not want Governments mucking about; we want it hardwired into primary legislation or affirmative regulations."

Q266 Chair: We accept the argument that sometimes there is a reason that it should not be on the face of the Bill. We accept that. Where is the scrutiny to make sure the unintended consequences do not creep in? The only people who have really been looking at it are the parliamentary draftsmen, who are great-I see them sitting behind you; I am not levelling any kind of criticism. They are absolutely superb. However, you need fresh eyes. You were hinting, perhaps, this Committee might do it, but we do not have the expertise, nor indeed do we have the time, for that kind of detailed scrutiny. Unfortunately from our point of view-or fortunately-your Government is doing an awful lot of reform in the area that we are responsible for. My question is: where is the scrutiny of these regulations going to come from? Where is the fresh pair of eyes that looks at them to make sure that the whole thing will work? You have said yourself, and most of our witnesses have said, that this is a crucial reform, so you must want to get it right.

Steve Webb: I do. Bear in mind we published a Green Paper nearly two years ago, so the basic idea has been out there for a long time. We had a consultation on that; we published the results of the consultation on that in the summer of 2011. The IFS, the PPI and all that-everyone is crawling over this. We also work very closely with those organisations and others. We help them to model what we are doing so they can analyse and publish their own stuff about what we are doing-it is not always helpful to us, but we do that. We will have a substantial parliamentary process with the Bill; we will be very clear about where we are going. The Delegated Powers Memorandum that I mentioned has been published, so we have set out in quite some detail what is affirmative and what is negative.

I am dying to finish my anecdote. The NEST Order regulations we did took six minutes. It was so secondorder it should have been in negative regulations, but Parliament back then was desperate to control and scrutinise and made it affirmative regulations. The challenge is not to stick everything in the Bill, because then it is just very rigid; it is to work out the things that really have to be in the Bill and put them in the Bill.

Q267 Chair: When will we get the regulations, then? You said the summer for the stuff that is going to affect external people that need to know-the employers and the pension companies-but what about the vast bulk of the regulations?

Steve Webb: A lot of it will be detailed and technical. We have to go through quite a lot of scrutiny; we do not just bung out regulations and they are law. The Social Security Advisory Committee has a role, for example.

Q268 Chair: Not on pensions.

Steve Webb: They do on some of the stuff. Yes, you are right; certainly not some of the pensions stuff that we have done, but there is a scrutiny role on some of the regulations there. I can say with some confidence that we will be accelerating the process of producing the regulations. I am already working with officials to try to speed up that process to get out the regulations sooner.

Q269 Chair: That takes us back to our first question, and Nigel’s question about the 2017 date. How fixed is that?

Steve Webb: I would be astonished if 2017 slipped.

Q270 Sheila Gilmore: One of the crucial things clearly, because you have talked about it a lot, is this interface between having autoenrolment and greater dependence on private pensions. That is clearly part of the overall big picture. Do you think there is going to be an opportunity in the next year or so to really make an impact on some of the major problems that exist, especially with the DC-pension world? The Telegraph splashed yesterday on the annuity situation, but there is a whole range of things about the poor quality of what people are actually getting. How does that fit in to departmental strategy?

Steve Webb: Somebody from another Department said to me the other day, "You have done the single tier; autoenrolment has started. What are you going to do with your time?" I said, "I have got a long shopping list." Quality in DC is very high up that list; you are absolutely right. Yes, we specify minimum contribution levels, but that is not good enough. We do not want people autoenrolling to notgoodenough schemes and we do not want people autotransferred into notgoodenough schemes. We are very actively working on a lot of those things, so that is a very live agenda.

Chair: That is our other report, on governance.

Q271 Nigel Mills: The one thing that confuses my constituents on this is a lot of them think there is a big bonanza coming where they will go from £107 to £144 overnight; I can understand why we are not doing that but they may not. How long do you think the existing State Pension system that people have already retired into, and will continue to retire into, will live on after 2017? Are you envisaging that, 10 years later, we may just move everybody on to the £144, or whatever it is by then, and lose all this history? It is difficult enough now to find people who can advise people on what the situation is and what they can claim; as the years go by and they get less and less and less, it is going to be really hard for a 90yearold in 2044 to have the foggiest idea of what they are meant to have.

Steve Webb: Once you are drawing a pension and once it is indexed once a year, how you got there may be excruciatingly complicated, but you blooming well know what you are getting; you know what that number is and you see each year what is happening to it. Funnily enough, although it may be a complicated number, once you are drawing it, we do not go into how you got there ever again; it is just your pension. People are used to that idea and are used to it going up every year. Speculating that we might take all of those and change all of those introduces whole new tiers of uncertainty.

Can I just very briefly address your point about the £107 and £144? The biggest group of people who have misunderstood what we are doing is the people who were in decent company or public-sector pension schemes. They think, "I am getting £107ish, because I was contracted out all my life. Steve Webb is about to give all these other blighters £144." The point is, where people were contracted out all their lives, we currently take off a big chunk from their State Pension to reflect the fact that they have paid less NI, and we will still do that in 2017 on the foundation amount. There is not this cliff edge from £107 to £144; there will be lots of people-teachers, nurses and so on-who are retiring post2017 on much less than £144, because a bit of that pension is coming from their scheme, not from the state. There is not that big cliffedge for those people.

Stephen Lloyd: One of the challenges we will have in the whole pensions area is that a lot of those folk will not understand that. They think they are getting £144 and they have that to look forward to in a few years’ time.

Chair: That explains some of the anger, as you can imagine. They genuinely believe it. Perhaps the simplification of the message was too simple, and suddenly people thought, "We are getting robbed."

Q272 Nigel Mills: Steve, you said that, once you get your pension, you know what the amount is and it indexes. The difficulty is, on the current scheme, Savings Credit will still be around for those people, as will Pension Credit. If your savings dwindle away and then all of a sudden you are entitled to something that you were not entitled to years ago, or your spouse dies and your income changes, these things out there that people do not claim now and understand will still be out there in 2040, but almost nobody will understand how on Earth they work. Are we really envisaging that that will live on until everyone that retires pre2017 has died?

Steve Webb: We are planning some streamlining. Over time, for example, Pension Credit here and housing benefit for pensioners there will come into a single system. We know some pensioners do not claim their Pension Credit and some pensioners do not claim their housing benefit. The two will be one system, so we are already having to budget for extra spending on meanstested benefits for pensioners in some years’ time because the system will be simpler. I take your point: in principle, a woman at 63andahalf, or whatever it is, in 2017 could still be drawing it at 100 in whatever that is-2054 or something like that. I cannot speculate on the transition arrangements at that point.

Q273 Chair: Presumably it will be up to some kind of future Government, but presumably it will also be up to some kind of future Government to try to float all pensioners above meanstested so that the single tier goes to a sufficient level and floats them off all of those.

Steve Webb: Yes, if you can fix the extra needs of severely disabled people and lowincome renters, which are two groups that for the foreseeable future will need topups.

Chair: I think we are exhausted; I suspect you are exhausted as well, Minister. Thank you very much for coming along this afternoon. Now we go off and write our report, which we hope to publish in a few weeks’ time. Can I thank you very much for coming along this afternoon?