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Baroness Greengross: My Lords, I thank the Minister for her reply and express my gratitude for the time and consideration that she has given to the

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matter. I welcome also her acknowledgement of the concerns that have been expressed—and which might be addressed, even though the Minister does not entirely accept the amendment.

I want to give the proposal every chance of further consideration. Sadly, I cannot be in the House at Third Reading because I have to be abroad that day. However, I shall follow the proceedings with much interest. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 [Savings credit]:

[Amendments Nos. 3 and 4 not moved.]

Lord Hodgson of Astley Abbotts moved Amendment No. 5:

    Page 3, line 7, leave out paragraph (a).

The noble Lord said: My Lords, we return to an issue of concern in Committee—the rights of persons who are entitled to something less than a full basic state pension but who have during their lifetime accumulated other savings or built up other pensions.

On withdrawing my amendment in Committee, I thought that there might be some more juice in the orange and we can seek to extract it this afternoon. The three major categories likely to be affected are individuals who work overseas, persons with broken work records and—the largest group—women who have taken career breaks to have and raise a family.

The noble Baroness, Lady Greengross, put down a helpful parliamentary Question, the Answer to which revealed that of 1.4 million pensioners who do not have a full entitlement, only 300,000 were men and 1.1 million were women. In Committee, the Minister said that 92 per cent of men and 83 per cent of women have a full pension entitlement but the booklet Partnership in Pensions—admittedly it is a couple of years out of date but the figures cannot have changed much—states that 86 per cent of men and 49 per cent of women qualify for a full state pension, the latter representing a big difference from the Minister's figure of 83 per cent. We need to be clear about what is the real figure.

In Committee, the noble Baroness, in replying to this issue, seemed to face in two different directions. She referred to the national insurance credit available for "good cause" which meant that the position of widows was protected, thereby implying that this was not a big problem and not many people were vulnerable. However, she went on to say that there were serious financial implications of around £2 billion per annum. It seems to me that either we have a problem here that is serious or we do not. We need to be clear which it is before concluding our discussion.

If, as they have said, the Government want to give people an incentive to save for their retirement and they want to be fair, we need to be clear on why women are three times more likely than men to have less than a full basic state pension and why persons aged, say, over 50, who have incomplete pension records, could properly be advised to save. Even if they build up an

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occupational or other pension entitlement, the earnings guarantee will be withdrawn and savings credit will probably never become payable to any great extent. In those circumstances, it is much better for them to take no action and to draw the guarantee from the beginning, thereby breaking the rule of trying to encourage people to save.

I accept that the argument "you get what you pay for" has force. However, it has the least force where people have not been able to pay; for example, where they have broken work records or where their partners have chosen to save for their old age in ways other than entirely through the basic state pension. A number of amendments have been tabled by my noble friend Lord Higgins and the noble Baroness, Lady Greengross, who are ingeniously trying to square this important point. I look forward to hearing the Minister's reply. I beg to move.

Lord Higgins: My Lords, perhaps I might add one or two remarks to those of my noble friend, who has spelt out the situation extremely clearly. I shall speak in particular to Amendments Nos. 9 and 12.

I have problems with this particular set of issues. I cannot help but feel that there is something wrong with what the Government propose. The simple point is that the object of the Bill is to reward and encourage savings. However, the reality is that the way in which the Government propose to do that in relation to people who have deficient contribution records means that many will receive no benefit as far as concerns their savings. It therefore seems to me that there is something wrong. The National Federation of Post Office and BT Pensioners has again been active in putting forward representations on that point. That organisation asserts that the Bill affects something like 75 per cent of its members. Therefore, it is understandable that it should be concerned.

As regards the problem we are discussing with this group of amendments, it seems that something like 1.4 million pensioners are affected. Three-quarters of those are women, one-third of whom will receive less than the full basic state pension. Therefore, this is not an unimportant issue. The crucial point is that the Government maintain that before people with savings but a deficient contribution record and a less than full state pension receive any benefits under the Bill, they will have to top up the deficient basic state pension to the amount of the basic state pension.

I have read carefully the Minister's comments in Committee. I was confused and I think she was confused. In our earlier debate the noble Baroness said:

    "However, when it comes to the saving credit, I believe that it is right that we reflect the effort that individuals have made to build up their savings. If they have built up their savings but their retirement pension record is incomplete, it seems to me entirely appropriate that, first, their savings should be set against their incomplete retirement pension in order to bring . . . [it] up to that of the retirement pension".—[Official Report, 24/1/02; col. 1643.]

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I have great difficulty in reconciling the two parts of that statement. On the one hand the noble Baroness says that she is sympathetic to the fact that people should receive benefit from their savings. She then goes on to say, "But, of course, we shall knock that off until you get up to the basic state pension". That has the effect of those individuals not receiving any benefit from their savings. The two parts of the statement which I have just quoted seem to me wholly incompatible.

Baroness Hollis of Heigham: My Lords, does the noble Lord accept that the alternative position is that someone who has savings and an incomplete retirement pension would be rewarded as though he had a complete retirement pension; and thus that would be unfair to two people with different national insurance records?

Lord Higgins: My Lords, I put that in the context referred to by my noble friend. One must distinguish between those who have a deficient record because they have decided not to contribute but would have been able to do so, and those who have a deficient record through no fault of their own. I refer, for example, to a woman whose husband has died and who becomes widowed before his record is complete. There is nothing that she can do about that. She has a deficient record. She is already penalised because she does not receive a full basic state pension. If, in order to cover that, she has made some small savings, under the Bill she will receive no benefit. It seems to me that that is not appropriate if we are to achieve the Government's record.

We discussed this in Committee. As a result, we have tabled somewhat different amendments. My noble friend has tabled his own amendment. Amendment No. 12 states, in effect, that the savings threshold will be the same proportion of the basic state pension as the individual's actual pension entitlement. If the basic state pension is, say, £77 and an individual with a deficient record receives only £50, the savings threshold for that person will be £50. Thus, if the individual's total income is over £50, whether from savings or second pension, that individual will qualify for savings credit in proportion to his contribution record. I hesitate, seeing my former permanent secretary at the Treasury sitting opposite. I am slightly worried that the arithmetic may not be correct.

However, at all events, we are seeking to ensure that if there is a difference between the two sides of the House on this issue, at least the individuals concerned with the deficient record should get some benefit from their savings. Otherwise, it seems clear that people who are already in this situation are not being treated as fairly as they might. They are already being penalised by the fact that their pension is less than other people's. That means also that people in that situation will be deterred from saving in future. There will not be any point in saving unless they can save so much that it takes them above the basic state pension. They will then receive a small benefit from the Bill.

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However, the particular group of people I have described will not receive any benefit under the Bill. That seems to be wrong.

Baroness Greengross: My Lords, I support the remarks of the noble Lords, Lord Higgins and Lord Hodgson. Amendment No. 6 is a simplified way of saying roughly the same thing. Many women, particularly older women, will not have access to the protection which younger women have for the years when they were not able to contribute. They should get the same proportion of the savings credit as that which one has managed to put into a pension. Otherwise we are making an example of those people and saying, "It is not worth saving because it won't make any difference". That is the opposite of what the Bill is intended to do. Therefore, my somewhat back-of-an envelope amendment is just a simple way of supporting very much what has been said.

4.30 p.m.

Baroness Barker: My Lords, I speak to my Amendment No. 10, which is in the group. Like the noble Lord, Lord Hodgson of Astley Abbotts, I take as one of my starting points the debate at Committee stage. The noble Baroness gave figures about the number of people who receive the full basic state pension. From an answer to a question asked by a colleague in the other place, Steve Webb, my understanding is that as at March 2001 the number of men and women at present entitled to a full basic state pension in their own right is 92 per cent of the men and 49 per cent of the women. I understand those to be figures which the noble Baroness gave to us at Committee stage, which included the number of women entitled to a full pension as a result of their partners' contributions. That may have caused confusion for some of us.

I turn to the substance of the amendment. I hope that the noble Baroness will have noticed that I have paid a great deal of attention to the argument that she deployed at the Committee stage. She quite rightly drew the distinction between those who could have paid, but did not, and those who did not because they could not.

I do not make many claims for my amendment. I do not claim that it is either simple or elegant. But what I have attempted to do is to consider those women who could not make a contribution because they were looking after children prior to 1978 when home responsibilities protection began to be paid to women in such a position. At that time home responsibilities and child care were not recognised.

On the basis of evidence and records such as child benefit payments, my amendment seeks to reward those whose contributions record was broken for reasons which would not have applied to later generations. For example, Jane—I use that name for the purpose: she is my version of Frank—was born at the end of the war. She had her children in the 1960s and early 1970s. She was therefore out of the labour

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market at that time. She has now reached old age and yet again, and for the second time in her life, she is penalised.

She belongs to a generation of women who were told that they had never had it so good, but on reflection they appear to have had it uniquely bad. I am sure the noble Baroness will like my amendment because it is targeted, it is not universal and clearly specific. It is also based on evidence. I look forward to the noble Baroness welcoming my amendment with open arms.

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