Pensions Bill [HL]

Baroness Hayter of Kentish Town Excerpts

Tuesday 15th February 2011 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, in thanking the Minister for introducing this Second Reading, I hope he will forgive me for paying particular tribute to my noble friend Lady Drake, for her extraordinary work for many years in this area. The noble Lord, Lord Stoneham, has just talked about the Turner report, but it was of course the Turner, Drake and Hills report—and, had it been alphabetical, it would have been the Drake, Hills and Turner report.

The aim of the Turner report was to enable a future generation of retirees to enjoy a meaningful income, partly by having worked longer but partly by having saved more, with a little help from the state and the employer. That is an aim that we all support. As for working longer, in 1995 the law equalised the state pension age for men and women and said it should be achieved by 2020. Of course this change hurt only women as it was their pension age that was changed, from 60 to 65. However, more than 25 years were allowed for this change to happen. Then there was the 2007 Act, which was influenced very much by what I have newly named the Drake, Hills and Turner report. It was agreed on a cross-party basis that both men’s and women’s pension age was to rise first to 66 by 2026, then to 67 by 2036 and, finally, to 68 by 2046. In each case, however, there was plenty of notice and time to plan, especially for women, for whom this increase from 65 to 68 would come on top of the earlier rise from 60 to 65. Overall, the increase of eight years in the pension age for women, phased over that 36-year period from 2010 to 2046, gave effectively a working life to prepare. How different it is with this Bill.

The first difference is that there has been no all-party consensus. The second is the accelerated rise for women, which we have already heard of, to 65 by 2018 instead of 2020. Furthermore, the pension age for men and women of 66 by 2020 has been brought forward a full six years from the original date of 2026. That is not just a minor adjustment for a small number of people. Some 4.5 million of our citizens face an increase in the age at which they can draw the pension to which they have contributed and which they have anticipated over perhaps 30 years. Some women will have to wait more than a year longer for their pension. Some of those will have got used to the idea of the uplift from the 60-year retirement age only in the second half of their working life.

I give the example of Linda Murray, who is one of the 500,000 women born between 1953 and 1954. In her words, she,

“will be confronted by real hardship… It means working a further 22 months before I can draw a pension”.

Linda Murray has worked continuously since she was 16 years old, nearly always full time apart from a brief period when she looked after her mother, and she expected to draw a pension at 60. However, she accepted the 1995 increase, which saw her retirement date set as July 2018, when she would be 64 years and two months. But, as she says,

“having to wait an extra 22 months at such short notice before I daw a pension is not something I had planned for. I work in a physically demanding job”—

she says that; it is not me—

“at a dry cleaners, 46 hours a week just to make ends meet. I have never had the means to save for a private pension. We paid our contributions and assumed we would draw a state pension”.

Even part-time retirement is no longer an option for her. She would need to save at least £12,000 to be able to work part time from the age of 64. I think that the House will understand that, with a take-home wage of £270 a week, saving is out of the question for her.

Do the Government even begin to understand the predicament of Linda Murray and others like her? I ask the noble Baroness, Lady Noakes, whether this is really someone she wants to have to continue to work, standing on her feet in the dry cleaners 46 hours a week until she is 68. I think that I must have misunderstood what was being said, as I do not think that that is what we would wish on women like that. What Linda Murray cannot understand, although she accepts the original increase, is how the goalposts have been moved with so little warning. I shall read from her words again, as they are worth repeating:

“Women of my generation have faced years of inequality in the workplace. Many took time out to raise families, and on average we earned much less than our male counterparts. We have not had the same opportunity to build up private pensions, and now we are facing severe financial losses, of between £10,000 and £15,000, without the time or opportunity to prepare”.

Another correspondent, Joy Walters, wrote:

“I have no problem with the principle of equalisation but this is too fast and has placed an unexpected burden on women of my generation that was not foreseen earlier in our working lives”.

This same Joy Walters will have to wait another 23 months to claim her pension. This is not fair—the word that was used earlier—as it affects women with little private pension and no time to make alternative plans. This is inequality laid on inequality. These women did not have equal pay at the start of their working lives and many were barred from company pensions simply for being part-time. These women have been given only seven years’ notice of a further two years’ increase in their pensionable age; men, by contrast, were given eight years’ notice of an increase of one year.

Furthermore, under this Bill, as other noble Lords have said, there will be a three-year difference in pension age for women born just one year apart and an even bigger jump from my very lucky generation. I am only five years older than Joy Walters but I drew my pension at the age of 60, while she will have to wait until she is 66. It is Joy and her cohort, the women born around 1954, who have shouldered the burden of the increase in retirement age to equate with that of men. Funnily, when I was young, I thought that equality was going to help my gender. I did not realise that we were going to be the ones who ended up paying for equality, but such it is. It is a gross injustice that this group of women will be subject to a loss of pension greater than anyone else’s. Joy Walters wrote:

“It has been difficult to get used to an increase of 4 years in pension age when we were already middle aged, but we accepted this without complaint. This further unexpected increase of another 2 years has left me devastated”.

What is the cost to women of all this? As my noble friend Lady Drake said, a third of a million women will face an increase of 18 months or more, while 33,000 will have an increase of two years, retiring just weeks before their 66th birthday. These women, who are now in their mid-50s, will lose over £10,000 each. With just seven years to prepare, they have been told that they must work an extra two years. We already know the disadvantage that they have within private pension schemes. As my noble friend Lady Drake also said, the median pension saving of a 56 year-old woman is £9,100—one-sixth of a man’s—which probably produces an income of £11 a week. That is not enough even for nice biscuits and teabags, I am afraid. It would be only £11 a week even if the whole of their savings could be put into a pension. I wonder what these women born in 1953 and 1954—the noble Lord, Lord German, referred to them as the bubble—did to upset the coalition so that they are being asked to bear the burden of this policy change.

There is an alternative. We must give men and women a chance to plan for their retirement, with time to plan and time to save, as the noble Baroness, Lady Greengross, said. No one should be put in the position of having an increase in state pension age of more than a year; everyone, I believe, should have at least nine years’ notice. I urge the Government to retain the current timetable for the equalisation of pension age and delay the move to 66 until after 2020. At the very least, they should heed the wise words of the noble Lord, Lord German, in his specific suggestions.

I turn briefly to the second aspect that I want to touch on—auto-enrolment. Women have always done worse at work and worse at retirement. At work they have had low pay, and many have worked part-time. Fewer are in company pension schemes, and fewer have savings with which to boost their state pension. That is why the Labour Government legislated for auto-enrolment, which is vital for three reasons. First, it covers everyone, particularly the low-paid and part-timers. Secondly, by being an opt-out rather than opt-in scheme, it uses inertia—or the nudge, perhaps—to increase participation. Although it is true that I would have liked it to be compulsory, even that most brilliant Labour Government did not give me everything that I wanted in life. The opt-out nature of auto-enrolment was an important part of the scheme. Thirdly, it means doubling your money. For every pound that the employee puts in, the employer and the Government together then double it. This is a real incentive and a proper recognition of the responsibility of the state, the employer and the individual to put aside money for retirement. As for the question from the noble Baroness, Lady Greengross, about the use of ISAs, I wonder whether those accounts would double one’s money as auto-enrolment does. I am sure the Minister will come back to that.

Finally, there is NEST, for which we have to thank my noble friend Lady Drake. She did so much to prepare for NEST during her chairmanship of PADA, a body on which I served for a few months. It is a brilliant organisation. It is the default pension scheme, so employers do not have to set up or run their own scheme. It has a low cost for members, is open to all employers and has a clear focus on members’ interests. It is not a monopoly; it is a choice for the employer. Not everyone has to join. I warmly welcome the Government’s confirmation of auto-enrolment and NEST. I congratulate NEST on its progress to date in preparing to open on schedule, within budget and with language and processes targeted precisely at the intended audience: the lower-paid, first-time savers and part-timers. Unfortunately, however, the Government have tinkered with auto-enrolment and will allow workers to wait three months before signing up. This undermines the inertia and means that people will have three months of getting used to their salary before feeling the loss of some of it into a pension scheme. That is just the moment at which they are likely to opt out. Three months may not seem a long time but if people get used to that income, they might be less keen to start paying into a pension scheme.

As has already been said, increasing the threshold would mean that as many as 6 million people are not eligible for auto-enrolment. Those are exactly the people whom the scheme was engineered to assist—women and part-timers. Even the Government’s own impact assessment admitted that the changes, which aimed to ease the burden of employers and industry, are,

“likely to affect women more strongly than men due to underlying inequalities in private pension provision”.

I rest my case. I urge the Government to think again and, at the very least, if they will not move on the threshold, to give us an assurance that it will not be increased further after this jump, and certainly that it will not go up with the tax threshold. If they do not do this then—in 10, 20 or 30 years—we will find ourselves with another cohort of people with inadequate retirement income.

I cannot help but note that it was mostly men in the City who got us into trouble over financial debt, yet it is women who are being made to pay the price. Perhaps if there were more women in the Cabinet—maybe women Ministers dealing with this—we would not find so much of the burden falling on women. The Minister used the word “fairness”. I am not certain that the Bill is fair to women. I urge the Government to look at the timetable again.