The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)
My Lords, I thank the noble Baroness, Lady Bakewell, for raising this issue once again and for securing this debate, to which it is important that I respond.
The debate highlights two integrated areas of the Government’s reform programme: the state pension age changes and the new state pension reforms. I hope to address some of the points raised by my noble friends here. I reiterate, as I have many times, that I have sympathy with the women who still feel aggrieved about their state pensions. I hope my remarks today will clarify some issues about which there has been much commentary. My aim has always been—and remains—to help people, where I can, to achieve better pensions. I hope to be able to steer future policy in positive directions to make pensions work better for people, both today and in future years.
First, I will address concerns, which the noble Baroness, Lady Bakewell, among other noble Lords, particularly focused on, that the women affected by state pension age changes were not given adequate notice of the 1995 state pension age equalisation. I recognise that there has been much criticism about the Government’s efforts to notify the women affected. However, I will explain more about what I have been told the department did on this matter.
State pension estimates, issued to individuals on request, made the 1995 changes clear. The DWP’s state pension estimates have been providing individuals with their most up-to-date state pension age since 1995. The department does not have figures before April 2000, but since then it has issued more than 11.5 million personalised state pension statements to people who requested them. We continue, as noble Lords have said, to encourage people to request one as part of our ongoing communications.
To raise further awareness of the state pension age equalisation under the Pensions Act 1995, in July 1995 the department issued leaflet EQP1a, Equality in State Pension Age: A Summary of Changes, to advise the general public on the changes. The DWP ran a pensions education campaign in 2004, which included informing people of the future equalisation of state pension age. That campaign included: advertising features in the press and women’s magazines; a “women’s pensions pack” containing leaflets for women about changes in state pension age, made available through the Pension Service; direct mailings targeted specifically at women, highlighting that women’s state pension age is changing; sending state pension forecast letters with leaflets explaining the changes to women’s state pension age to those who requested them; and developing an interactive state pension date/age calculator facility on the Pension Service website.
A 2004 DWP report, Public Awareness of State Pension Age Equalisation, reported its survey findings that 73% of those aged 45 to 54 at that time—in 2004—were aware of the changes to women’s state pension age. In addition to this, all those affected by the 1995 Act changes were sent letters from April 2009 to March 2011 using the address details we had—I admit that we may not have details for everybody, but what else could we do? It is therefore difficult for the Government to accept that people did not know that their state pension age has risen from 60, and it is not accurate to try to suggest that this is a six-year rise. The change is a maximum of one and half years.
The second concern, rightly expressed by noble Lords, concerns the short-notice changes made in 2011. Following the 2011 Act, the DWP wrote to all those directly affected individually to inform them of the change to their state pension age. By this point, state pension age was already in the process of rising. This involved sending more than 5 million letters to those affected between January 2012 and November 2013, which was a major exercise.
I will move on to the rationale behind the state pension age changes. The changes were made to ensure the affordability and financial sustainability of our state pension system, on which so many millions in the population rely. They were also of course required to remove the long-standing inequality between men’s and women’s state pension age. The previous arrangements meant that, for those reaching state pension age in 2010, women would spend on average over 40% of their adult lives in receipt of state pension, while men would receive their state pension on average for only 32% of their adult life due to their shorter life expectancy and the fact that they receive the state pension later. This was clearly unsustainable and was considered unfair by many at the time—for example, by men who were paying national insurance contributions for more years while women received their state pension earlier than them.
Parliament did not consider it fair to current or future taxpayers to continue prolonging the inequality between men’s and women’s state pension age beyond 2018. This was democratically debated and decided at the time. I campaigned hard for these women as I was aware of the problems faced by some of those affected. That campaign achieved a major concession, despite the grave fiscal situation at the time, which eased the timetable for around 250,000 of them. It committed the Government to prolonging the inequality between men’s and women’s state pension age by an extra six months relative to the original Pensions Act 2011 timetable—proposals that would cost the taxpayer more than £1 billion.
The noble Baroness, Lady Bakewell, rightly mentioned that people in an ageing population with rising longevity will work longer. Indeed, the average actual retirement age for women has for many years been above their state pension age, so clearly most women no longer wish to stop working at 60. My noble friend Lady Jenkin also rightly mentioned this. Encouraging and enabling those who want to work longer is a government priority and is the best solution to poverty in later life for those who can do so. Most people are just not “old” at 60 these days—or even at 65, in most cases—and the expectation of stopping work altogether at such a relatively young age is simply not sustainable.
Of course, I am concerned about the particular position of women—and indeed men—who cannot work. Some may have caring responsibilities, while others may suffer from disability or illness which make work difficult, but the Government will ensure that both women and men who are affected will be eligible for the in-work, out-of-work, ill-health or disability benefits that we have designed for them. Carer’s credits and carer’s allowances are available for both men and women who care for others. It also has to be said that a state pension is not a right—it is not like a private pension but is rather a social security benefit. The national insurance we pay pays for many other elements of the social insurance system: unemployment, ill health and disability benefits, as well as the NHS.
The noble Lord, Lord Stoneham, whom I thank for his warm words of welcome, rightly highlights the reasons why the new state pension reform is so important. The changes to the women’s state pension age helped pave the way for this radical major reform, which has introduced the new state pension. The cost savings resulting from those changes, and savings elsewhere, have allowed the new state pension to be introduced from April 2016. The women in their 50s whose state pension age was increased by the 2011 Act will all receive the new state pension when they reach their state pension age.
I reassure the noble Lord, Lord McKenzie, that, contrary to some media representation, the new state pension will be more generous for most women, who have historically done poorly under the current system—as I have long recognised and highlighted—largely as a result of their lower average earnings and periods of part-time working. Today we have published some analysis showing the impact of the new state pension on an individual’s pension outcome in the first 15 years of the new scheme. In that period, 70% to 75% of women will have a higher notional state pension income than under the old system.
My noble friend Lady Jenkin mentioned financial planning and financial education. She is absolutely right: this is vital, and the Government’s programme of reforms can help facilitate it. The new state pension reforms have paved the way to make auto-enrolment safe so that all workers will be entitled to a pension at work as long as they earn more than £10,000 a year. That gives us the opportunity to embed financial planning and financial education in the workforce via employers and providers. Of course, I am happy to consider meeting Shirley Conran about the important issue of female financial planning.
As I mentioned, the cost savings have paved the way for the new state pension. All of this is being done in the interests of gender and intergenerational equality and of a sustainable pension system for the future.
I thank noble Lords for their contributions. I agree that communication is vital and we are having a major communications campaign. Information is being rolled out and will continue to be rolled out in detailed blogs and advertisements, as well as in digital, radio and social media advertising. I have written extensively about this and will continue to do so.
I thank the noble Baroness for bringing forward this debate and am pleased that we have had the opportunity to discuss these vital issues. I reassure the noble Lord, Lord Stoneham, that we have no plans for further delays to auto-enrolment. We are merely aligning thresholds to make the increases in contributions easier so that we have fewer opt-outs. I want to say how much I have appreciated the quality of today’s debate and I thank noble Lords for taking part.