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Lord Burlison: My Lords, in line with the recommendations set out in the Companion, I have to tell noble Lords that the time limit of 20 minutes allowed for Back-Bench contributions has now been reached. We must move on.
Child Support, Pensions and Social Security Bill
5.26 p.m.
Lord Goodhart moved Amendment No. 109:
- Before Clause 30 insert the following new Clause--
. For section 79 of the Social Security Contributions and Benefits Act 1992 there shall be substituted--
"Age addition.
79.--(1) A person who is above the specified age and who is entitled to a retirement pension of any category shall be entitled to an increase of the pension, to be known as "age addition".
(2) Where a person is in receipt of a pension or allowance payable by the Secretary of State by virtue of any enactment or instrument (whether passed or made before or after this Act) and--
(a) he is above the specified age; and
(b) he fulfils such other conditions as may be prescribed,
he shall be entitled to an increase of that pension or allowance, also known as age addition.
(3) In this section "specified age" means an age specified by the Secretary of State in regulations.
(4) Age addition shall be payable for the life of the person entitled, at weekly rates to be determined by the Secretary of State in regulations.
(5) Regulations under this section may--
(a) specify one or more specified ages at which age addition shall be payable;
(b) provide for different rates of age addition to be payable for persons of different specified ages.".").
The noble Lord said: I rise to make what is positively my first, but not my last, appearance in the debates in Committee on this Bill. The proposed new clause provides for age additions--that is, additional payments--that are to be paid to older pensioners as an addition to their basic state pension. It would be paid to everyone who is entitled to a basic state pension.
The amendment is the same as one introduced by my honourable friend Mr Steve Webb in the other place. Formally, it does not specify the age at which the additions will be paid or the amount of such additions. Of course, the amounts will need to be flexible and will have to be varied from year to year. I should say that the current proposals of my party are that there should be an extra payment of £5 to single pensioners aged 75 or more. That £5 should become £7 when they reach the age of 80.
We recognise the problems with financing earnings-linked increases in the basic pension, but we also recognise--and do so acutely--the serious problems of elderly pensioners. The present "age addition" of 25p per week payable at the age of 80 is obviously completely farcical and I believe has not been increased at all since 1971. Elderly pensioners are undoubtedly those who are most in need. If they have an occupational pension, they are likely to have the lowest. They are very unlikely to have a personal pension; certainly not one of any significant amount. Moreover, those in their 80s will not even have SERPS (or not SERPS of any significant amount) because in many cases they will have retired before that was introduced in 1978.
In some respects, elderly pensioners have greater expenses, especially when it comes to heating and perhaps to some extent clothing. Therefore an additional pension for pensioners who are aged 75 and over will target those most in need without having to require them to submit to means testing. It will also greatly reduce the need for older pensioners to have to claim the minimum income guarantee.
As pensioners get older, it becomes more difficult for them to get hold of forms, to understand them and to fill them in. I believe that much of the failure to claim MIG is due to difficulties with form filling which may
I should, however, add that, strong as the case is for age additions in any case, that case is made vastly stronger by the proposed introduction of the state second pension. There are two reasons why that is so. First, the state second pension will be earnings-related up to pension age by the revaluation of the earnings factors but will be price-linked thereafter. Once the state second pension comes into payment, it will increase annually only in accordance with prices and not in accordance with earnings. The minimum income guarantee, however, is likely to be earnings-linked. The result of that will be that people who start with a pension above MIG level will find that their pensions fall below MIG after a few years. The estimate is that this could happen after some 10 to 15 years, even for people with full contribution records who rely on the basic pension and the state second pension.
I do not believe that that result is acceptable. The age addition should be fixed at levels which will prevent pensioners with full contribution records for the state second pension falling below MIG level. There is, I believe, also another reason why the state second pension makes the age addition particularly necessary; that is, that the state second pension, at stage 2, will cease to be an earnings-related pension, or a pension which has an earnings-related element in it, because the amount of pension at stage 2 will be linked solely to the notional lower earnings threshold--a figure which is currently £9,500.
As I understand it, the lower earnings threshold will increase in line with earnings. The result of that will be, for example, that people who retire in the year 2020 will receive a higher state second pension than those who retire in the year 2010 and are still living in the year 2020. Of course, to some extent this problem already arises with SERPS but it is much less obvious because SERPS is earnings-related--as its name suggests--and therefore the spread of pension amounts among those retiring in any one year is wide. However, this problem does not arise with the basic pension because it is the same for all pensioners with full contribution records whenever they retire. Therefore someone who retires this year will receive the same basic pension as someone who retired 10 years ago.
At stage 2, the state second pension will become, in effect, an additional basic pension. If those who retire this year were to get a higher basic pension than those who retired in 1985, I believe, frankly, that there would be hell to pay. If the Government are to stop short of a full earnings link for the state second pension while it is in payment, I believe that they must find some other way of providing larger pensions for older pensioners. I believe that this can, and should, be done by a substantial age addition.
As we know, the Government face outrage over their 75p per week increase in the basic pension.
Baroness Hollis of Heigham: Did the noble Lord refer to the earnings-related state second pension, or did he mean the state pension? Will he clarify what he said in his previous one or two sentences? I believe that he referred to the state second pension; I think that he may have meant to refer to the state pension.
Lord Goodhart: I am not quite sure to which passage the noble Baroness refers. I said that in effect at stage 2 the state second pension will become an additional basic pension and will cease to have any earnings-related element.
I believe that, particularly after the state second pension has ceased to be an earnings-related pension or have an earnings-related element, there will be serious problems because someone who retires in 2020 will receive a higher state second pension than someone who retires in 2010, even though in neither case is the pension earnings-related.
Even if the present system was maintained, I believe that age additions are essential if the Government are unwilling to return to the earnings link for the basic pension. I also believe that the introduction of the state second pension makes age additions doubly important. Without them the unfairness to older pensioners will be built into the system and the state second pension simply will not work. I beg to move.
Lord Astor of Hever: The noble Lord, Lord Goodhart, put his case eloquently. We on these Benches share his concern for older pensioners. However, reluctantly, we are unable to support the insertion of the new clause. As he explained, it proposes that pensioners of a certain age should be entitled to a pensions increase. However, as the noble Lord said, the age and amount are unspecified.
Furthermore, it is open-ended and would commit future governments to expenditure that might not be sustainable in the long run. The oldest pensioners are an important priority for these Benches. In the years 1997-98 the previous Conservative government targeted the oldest pensioners by increasing premiums for income support, housing benefit and council tax benefit. We feel that there are more effective ways to help older pensioners than this new clause.
Lord Brett: I find the amendment in the names of the noble Lord, Lord Goodhart, and the noble Earl, Lord Russell, superficially attractive, particularly as regards the desire to help poorer older pensioners. However, I question whether the age addition--whatever amount is suggested--would achieve that as well as the Government's current policy. Over the past two years the Government have tried to eradicate pensioner poverty by aiming policies at less well off pensioners, whether that be through reductions in VAT on fuel, the increase in winter fuel payments or the 10p rate of tax.
The amendment, which contains elements which concern the Conservative Front Bench, does not target the poorest pensioners. Those on income-related benefits would not benefit at all from the provision that is proposed. Perhaps the simplest and the wisest policy is to try to do everything possible to overcome elderly pensioners' fear of filling in forms. Perhaps the Government should make an extra special effort to ensure that pensioners who qualify for the minimum income guarantee are given every assistance to enable them to claim it. I believe that the minimum income guarantee will be in the gift of governments in years to come. It can be made more effective provided we ensure that people understand the role it plays and their rights to it. I hope that the Minister will explain what plans the Government have to ensure absolute take-up of that benefit rather than go down the route of added payments at the age of 75 or 80.
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