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Lord Oakeshott of Seagrove Bay: My Lords, I feel at some disadvantage in the debate compared with the noble Lord, Lord Higgins, who has received his pension up-rating, very properly looked at it and seen what he has seen. I do not yet receive a pension, but I am sympathetic to the point. It irritates me greatly when I get my car or house insurance renewal and it does not give the previous year's figure and one has to look in one's records. So, in principle, that sounds like a good idea and a good request.

I have two or three separate points and questions tonight. I shall deal first with indexation and the points which we discussed in Grand Committee a few days
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ago on the indexation of FAS and the PPF. The noble Baroness was kind enough to respond to the questions I raised and in particular to my surprise at the Secretary of State's remark that many financial assistance schemes are not index linked. I am bound to say that the reply confirms my surprise at his original remark. It shows that 77 per cent of active members in DB schemes in 1995 were accruing rights with some pre-1997 indexation.

I shall summarise the reply and hope that the noble Baroness will confirm that I am right. Effectively, it says that it would cost too much to look in and check up on indexation rights accrued since 1997 and pay them. That is not at all the same. I hope that the Minister will accept that and correct the Secretary of State's statement that any scheme would not have been index-linked at all.

On the FAS specifically, does the Minister agree with the assessment by that doughty campaigner for the dispossessed, Dr Ros Altmann, that the effect of this permanent non-indexation of pensions to be paid under the FAS would for some mean a cut of up to half of the total money they receive over their retirement?

I turn now to the question of the citizen's pension, a matter which the noble Lord has already raised. I am struck by the growing consensus regarding the words used by Dr Lynne Jones in the Commons debate on these orders. She said that she had just been to a Pensions Policy Institute meeting and would prefer it if we had a citizen's pension entitlement for all pensioners at £105 per week, which obviously would now be £109.45 per week. It seems to me that this is an idea whose time has come. There is a rapidly growing tide of support for it in the pensions and the political world, but that means nothing until it actually sweeps away the bolted and barred doors of the Treasury.

I say to the noble Lord, Lord Higgins, and Members on his Benches that in principle we welcome the move towards support of this scheme. Again, it really does not mean very much if pension credit is going to be linked to earnings under the proposal and if the basic state pension at more or less this level is going to be linked to earnings as well. That means that it will be a very long time before the effect of the rises enables pensioners to be taken off pension credit. While we support the principle, we hope the money will be found to move forward faster on that.

Lord Higgins: My Lords, I am most grateful to the noble Lord. On his proposal for a citizen's pension, would that effectively mean the end of the contribution principle? If so, does he think that after the change those who have contributed should get more than those who have not?

Lord Oakeshott of Seagrove Bay: My Lords, I am happy quickly to clarify that. Yes, it does mean the end of the contribution principle. However, people will all receive the same regardless of whether they have contributed.

I shall summarise the other issue, on which I shall end. Putting the matter in a slightly wider context, I should like to remind the House and indeed the
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Government of the power of pensioners today. They are the fastest growing and keenest voting age group. As recently as 1992, a quarter of votes were cast by pensioners. Their turnout was similar to that of other groups.

Last time 35 per cent of votes were cast by pensioners because 70 per cent of them voted compared with 55 per cent for the rest of the population. If you add in the over-55 year-olds—the pension generation, if you like—half the votes in the coming election will be cast by pensioners. Women, who will be in the majority, will be effectively moved in giving their verdict by the muddle and mess of the Government's pensions policy.

To end on a positive note, as I look at the Box and the Front Bench, it is refreshing to see the entire government and official position represented by women.

8.15 p.m.

Baroness Hollis of Heigham: My Lords, that was an unexpectedly generous tribute from the noble Lord, Lord Oakeshott, which was very nice indeed.

Your Lordships have been brief, so I shall try to be, too. I shall take the points as they were raised. The noble Lord, Lord Higgins, asked about waiting for Turner and he gave his usual critique on the failure of the Government, given ACT—of course, it had nothing to do with ACT—and what he would regard as the £5 million, which actually cost us £3.5 billion, withdrawal of dividend tax credit from pension schemes as responsible, along with FRS 17, for the collapse of DB schemes. The noble Lord knows that that is nonsense.

I do not doubt that pension companies would be financially better off were they to continue to have that £3.5 billion, which represents that they got double payments on top of reclaims on tax paid. The reason why DB schemes failed to continue as expected was to do with the stock market collapse. As a result, the yawning deficits that opened up were compounded by the fact that even as late as 2001–02 many companies were still continuing to take contribution holidays. That is the core of it—that, and the failure of actuaries properly to predict what we now know are more robust longevity figures.

The combination of under-funding, stock market collapse and underestimated longevity produced a structural problem for DB schemes that will take time to remedy, but which may, as the stock market recovers, help to float some of those companies into a better situation. Certainly, the latest figures suggest that there is no longer the flight from DB schemes, but that is not to say that many of them will not continue to struggle until, if, or when the stock market possibly floats them off.

To blame it on a government policy that sought to rectify a tax distortion, while at the same time reduce corporation tax to about the lowest in Europe—about 30p in the pound—is a political point that does not gain in relevance or acuteness the more it is repeated. It is simply daft. We know what collapsed DB schemes, and that was not a significant element.
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On the more substantive points, the first being basically a debating point, such as pension credit, means testing, and so on, the noble Lord was right to press me about the number of people claiming. As suspected, his figures are a little out of date but not by much. The latest figures I have are that 3.2 million pensioners are claiming pension credit. We cannot be absolutely sure how many people are entitled but not claiming, but our best estimate is that possibly 1.7 million may be in that position. Many of those 1.7 million will be failing to claim very small sums of money. They were part of the wave of people who were brought in when pension credit was made more generous, and are at that end of the wave on the beach.

The significant point is that 3.2 million people are claiming, and it has transformed their living standards. As for the dig about what has been happening to means testing, I am sure that the noble Lord would like to know that in 1994–95, 38 per cent of pensioner households were on income-related benefits, and in 2002–03, the latest figure is 32 per cent. Under this Administration the percentage of pensioner households on income-related benefits, including pension credit, has fallen, even though we have made pension credit more generous, thus bringing in more people. That should be acknowledged.

Some of the earlier claims of pensioners to income-related benefits were in terms of their dire poverty, but we are now seeing that with pension credit—in particular, the pension-savings credit—there is an increase in comfort. People no longer see a pound for pound withdrawal of their savings because they are no better off than were they on income support.

On the point about forms, I shall review that matter. The noble Lord is right that it does not say that. The noble Lord, Lord Oakeshott, also confirmed that. It is a fair point and I shall see whether there is anything that we can or should do about that, so that people know what the old figure was. People who kept last year's paper will know, but I agree with the noble Lord.

Lord Higgins: My Lords, can the noble Baroness remind us what the qualification is for the age addition?

Baroness Hollis of Heigham: My Lords, it is over 80. It is the measly sum of 25p a week. In my view, it should have been rolled in with other payments long ago.

On the GMP figure, I do not know any better than the noble Lord, Lord Oakeshott, how many companies were affected. It ensures that companies that produced contracted-out schemes before 1997 could contract out only if a portion of that scheme—we will call it GMP—matched the level of benefit that someone would have got in SERPS. The core aim was to ensure that, by contracting out, people did not find themselves inadvertently in a misselling situation in which they would have been better off remaining contracted in. That was the point of it, hence the increase. I cannot give the noble Lord the figures for
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how many people would have been covered by that. I shall see whether they are available; if so, I shall write to both noble Lords.

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