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Baroness Noakes: A number of speakers have talked about simplification being important in this highly complex Bill setting up the new pension credit. In particular, I support those Members of the Committee who are supporting Amendments Nos. 24 and 26 for reducing the savings credit age to the woman's pensionable age. That not only produces simplification across the whole Bill, but it also deals with the difficult issue of women retiring at the age of 60 who may be in low income groups not having sufficient additional income. Help the Aged has calculated that if women were deprived of their ability to claim the savings credit until the age of 65, they would potentially lose out on nearly £3,600 over that period which is a lot of money for women who perhaps do not have much in the way of additional resources. Similarly, men would be affected if they had retired early, perhaps against their own wishes, and they may need the protection of the savings credit.

A really important point here and elsewhere throughout the Bill is what kind of message we are sending out as regards savings. It seems to me that in this case we are saying that perhaps potential pensioners need to accumulate some capital because they will certainly need to draw it down between the ages of 60 and 65 in order to survive. That does not seem to me to be supporting an attitudinal change to saving which I believe is one of the Government's aims in this matter.

However, we do not live in an ideal world and everything that we might want to do is not necessarily affordable. Can the Minister say what additional public expenditure would be required, if the amendment were accepted, to reduce the savings credit age to the pensionable age rather than 65? I look forward to the Minister's comments.

Baroness Greengross: I support the point which has been raised that women pensioners between the ages of 60 and 65 hearing about the savings credit and

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knowing that they are excluded from it are going to feel pretty bad because there is nothing that they can do about it. I believe I remember at Second Reading the Minister saying that there was nothing that the Government could do about the age difference. It looked as though it might be a legal point which was then being brought forward. I imagine that it was connected with all men receiving the benefit at the age of 60 also; but I am not sure. I should be very grateful if that point could be clarified.

The other point I want to raise briefly is my concern about how the Government will inform those affected by this change. In principle I understand that the age must be increased because of rising longevity, changing work patterns and so forth which can justify this provision. But people have to know because this measure will seriously impact on their future planning. They need to begin planning now and it is very important that they do. We have the lessons from inherited SERPS to use as a model. We do not want another failure to inform people of a looming change in policy which will affect them very greatly.

Baroness Hollis of Heigham: There are a number of amendments which seek to make changes to the various provisions for age limits in pension credit and I propose to deal with them together.

I should have said earlier to the noble Lord, Lord Higgins, in particular and to the noble Baroness, Lady Barker, how much I have appreciated the fact that they were able to table so many of their amendments early which allowed us to do more detailed research work on them. Sometimes one of our difficulties is that what is intended in the amendment is not what it states. I found myself in the dilemma of trying to answer the words on the page—which are not the words spoken to. I suspect that that may also be the case as regards my noble friend's Amendment No. 54, which has an import in a different clause from that which she intended. I am in some dilemma as to whether I should make a speech which is irrelevant to the debate, but relevant to the amendment. But let me see how people's eyes glaze.

A number of amendments seek to make changes to the various provisions for age limits and pension credit and I shall deal with them together. Members of the Committee have made clear this evening that the minimum age for pension credit as a whole and for the guarantee credit in particular, is defined in the Bill as the "qualifying age". This is currently age 60, but will rise with state pension age for women from 2010. The minimum age for the savings credit element of pension credit is set at age 65, as is the minimum age for pensioners for whom an assessed income period can be set. Therefore, I want to return to the issue that was explored at Second Reading as to why the age is 60 for some and 65 for others and why we cannot change the age from 65 to 60. My best estimate is that the cost of bringing the age to 60 would be in the order of £200 million depending on how one "nets off" for other additional savings elsewhere. That is the kind of ballpark figure we are talking about.

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Perhaps I may begin with Amendment No. 11. It replaces the current wording used to define the qualifying age with a rather more concise form of words. It does not question the approach taken; namely, that the qualifying age for state pension credit should in future rise in line with equalising state pension age. As this starts in only eight years' time, it is clearly sensible that we should make provision now in primary legislation, as the noble Lord said, because it is the blink of an eye for pension credit to fall into line with this particular change.

However, the laudably concise form of words in this amendment introduces a rather less welcome ambiguity. If we say that in the case of a man the qualifying age will be a woman's pensionable age, we might then ask, "Which woman's pensionable age?" because pensionable age will be different for women born on different dates because the state pension age for women will start rising in 2010. The brief wording used in the amendment does not cover that issue whereas the current wording is rather longer for a good reason; namely, to ensure that there is no legal doubt that the reference is to a woman who is the same age as the man. I am sorry to have to go into that, but sometimes it is worth spelling out why what looks like a crisp solution ties us in legal knots, as this matter does.

I now turn to Amendment No. 10. The effect of this amendment is to set the minimum qualifying age for the guarantee credit element of pension credit at the age of 60, rather than allow the minimum qualifying age to rise in line with state pension age for women from 2010. This means a perpetuity amendment.

The Bill before the House creates a new benefit for pensioners. It is sensible to consider not only the present legal ages, but also those for the foreseeable future. That is why we are doing this. It was accepted in 1993 by the then Conservative government that the unequal state pension age—of 60 for women and 65 for men—was unfair. The resolution of this unfairness—to equalise both at 65—was debated and agreed by Parliament. The Pensions Act 1995, on which my noble friend and I worked closely, set out how that should be achieved. To allow people adequate time to make plans and provisions for their retirement, the women's state pension age will be gradually increased from 2010 so that by 2020 both men and women will reach state pension age at 65. Given that, it must be sensible to build that presumption into pension credit. That clearly raises issues about how we treat women meanwhile.

I now turn to Amendments Nos. 24 and 26 which seek instead to handle the matter the other way, which is not to treat women for the savings element as though they were coming into it at the age of 65, but to bring the savings credit element back to the age of 60, bringing it into line with the minimum age for the guarantee element. The minimum age for both elements of pension credit would then rise in line with state pension age for women beginning in 2010. On the surface that may seem a sensible and generous

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simplification. But there are compelling reasons why we have chosen to set the minimum age for men and women at 65 for the savings credit element.

As I hope that I explained at Second Reading, 65 is the only reasonable choice. It ensures equal treatment for men and women. We have had particular regard—a point raised by the noble Baroness, Lady Greengross—to ensure that the provisions of the Bill are compatible with the European Convention on Human Rights and with Community law. Therefore, men and women have to be treated equally to that effect during the transitional period.

Amendment No. 24 would thwart us in that respect as it would have the effect of adding to the unfairness which already exists because the state pension age has not yet been equalised. Perhaps I may explain. The 1995 Act sets out how the unfairness of having different pension ages for men and women would be resolved starting in 2010. But in the mean time we have to take care not to introduce new inequalities. That is a darned sight more difficult than it sounds: there are no easy solutions.

The savings credit aims to reward people for thrift, ensuring for the first time that they are not penalised for having made efforts to save. To do that we have to look at what provision, including state provision, people have made for their retirement. So the amount of savings credit payable depends on existing state help such as the basic state pension and SERPS as well as, for instance, occupational and personal pensions and savings. If the savings credit was payable to people aged 60 to 64, even though it started at 60, men and women would still have different outcomes simply because of the unequal nature of the existing state help that they receive. Depending on the exact circumstances, a man could receive either more or less savings credit than a woman in the same situation.

I am happy to try to give the House a worked example. Even if people look glazed now, it may help them when they come to read Hansard. An example was included for my elucidation that I shall share with the House. Let me go through it; I shall try to go slowly.

A 63 year-old woman has a full basic state pension of £77 per week and a £10 a week occupational pension. A 63 year-old man has no basic state pension, due to the difference in state pension age, and a £10 a week occupational credit. If the savings credit were available to 60 to 64 year-olds, the woman in this example would be entitled to £6 per week and the man to nothing, because he did not receive retirement pension.

If we take the same two people, but this time both having occupational pensions of £100 per week, rather than £10 a week, the effect is quite different. If the savings credit were available to them, the man would be entitled to £13.80 savings credit per week—because he received no retirement pension—and the woman would be entitled to nothing, because her pension would float her off pension credit altogether. That would clearly be unfair. To avoid that unfairness, it

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was decided to make the savings credit available from age 65, the first point at which men and women are treated equally under existing state pension provision. That also fits with the long-term intention to equalise state pension age at 65.

Your Lordships may well ask—I am sure that the noble Lord, Lord Higgins, has got this far, because he has tabled amendments on these lines—"Why must the savings credit build on existing state provision? Why can we not simply reward people's efforts to save for their retirement whatever form that provision may take? We would then avoid the problem of the inequality in state pension age". But that will not work either. If the savings credit were paid at age 60 to reward all types of provision, it would have to reward the basic state pension. But as that is not paid to men until 65, men would be at a disadvantage.

So I suspect that your Lordships would next say, "Why do you not deem him to have the state retirement pension"—we shall return to "deeming" on many occasions—"and then reward the additional provision that people have made?". But that would unfairly reward those who had not contributed to the basic state pension above those who had contributed throughout their working lives. Think of all those women who have only partial state pension because they have not paid the whole contribution.

Again, an example may be helpful. Jack is 63—perhaps we ought to move on to Frank, given that he is much beloved by the Opposition. Jack is 63 years-old and has no basic state pension as he has not yet reached state pension age for men. Before pension credit, his only income is £23 a week from an occupational pension. Jack will therefore receive £77 guarantee credit to top him up to the single persons guarantee level of £100. If he was deemed to have a full basic retirement pension of £77 when calculating the savings credit, all his £23 income from his occupational pension would be rewarded. So Jack would get a further £13.80 a week on top of the £77 guarantee credit. So his total weekly income—that is, his deemed retirement pension, his top up to MIG and his £23 of occupational pension, would be £113.80.

Jack's next-door neighbour Frank—we now come to Frank—is also 63 years-old and therefore cannot get state retirement pension either. His only income also comes from an occupational pension. But he has managed to save a bit more and gets £24 a week—£1 more than Jack. What would Frank get? Frank would get £76 guarantee credit to top up his £24 weekly income up to the guarantee level of £100. If he was deemed to have the full basic retirement pension of £77 when calculating his entitlement to savings credit, £23 of his £24 occupational pension would be rewarded at 60p in the pound, giving him £13.80. But his extra £1 would mean that that maximum level of savings credit was reduced by 40 pence, giving Frank an overall savings credit of £13.40.

So Frank's total weekly income, including his £24 of occupational pension, would be £113.40. I am sure that your Lordships have followed me this far. So despite Frank having an extra £1 of occupational

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pension compared to Jack, Frank would be 40p a week worse off. That is the result of the complexities of deeming. Perhaps another way to put this is that it results in a more than 100 per cent marginal deduction rate. So it will not have paid to save.

Those are only some of the difficulties; I could go on. However, as I flagged it up, it is also worth raising the difficulties associated with SERPS.

5.30 p.m.

Lord Hodgson of Astley Abbotts: In the example given by the noble Baroness—in that blizzard of statistics—she mentioned the impact on married couples. Is not one of the difficulties that in the Bill—although admittedly this is not covered by the amendment—men and women have been linked together again, whereas hitherto they have been separated for taxation purposes? Is not that the cause of the difficulty that we face, and does that not meet the point that I was trying to make?


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