Pensions Bill [HL]

Baroness Pitkeathley Excerpts

Tuesday 1st March 2011 Grand Committee

[The Deputy Chairman of Committees (Baroness Pitkeathley)]

My Lords, if there is a Division in the Chamber while we are sitting in Committee, we will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 1 : Equalisation of and increase in pensionable age for men and women

Amendment 1

Moved by

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I take this opportunity to thank the Minister and his team, who have been very helpful and accommodating as we have gone through our amendments. There have been some government amendments, and I am grateful for their explanations.

The purpose of this group of amendments should be very clear. Collectively they seek to review the Bill’s acceleration of the equalisation of the state pension age for men and women. They preserve the existing timetable set out in the Pensions Act 1995, which means that women will reach pensionable age at 65 if born after 5 April 1955. For women born between 6 April 1950 and 5 April 1955, state pension age will gradually increase over a decade, rising one year in every two.

The state pension age needs to rise in order to pay for a more generous basic state pension linked to earnings. This was a principle established by the Labour Government in 2007 and one that we continue to support. By retaining the table contained in the Pensions Act 1995, the increase in state pension age to 66 for both men and women is negated. However, our Amendment 4 brings forward the increase for men and women to 66, accelerating this by four years to between 2020 and 2022.

The amendments make no specific proposals for changing the current timetable for increasing SPA to 67 between 2034 and 2036 and then to 68 between 2044 and 2046, legislated for in the Pensions Act 2007, although we accept—as do the Government, I believe—that increasing longevity will eventually cause that to be revisited. We do not challenge the life expectancy projections that the Government have used to underpin their policy changes. We do, of course, accept that life has literally moved on since 2004, and the data which underpin the Turner settlement have moved on. Average life expectancy for those who reach 65 in 2026 has increased by 1.5 years for men and 1.6 years for women. Our challenge to the Government and their response to these changes is to the speed and equity of the adjustments that the Bill seeks to make, particularly for women.

When the Conservative Government legislated to equalise the state pension age for men and women at 65 in 1995, they gave 15 years’ notice from the beginning of the change and indeed 25 years’ notice of the end of that change. When the last Labour Government legislated to increase the state pension age to 66 in 2007, they gave 17 years’ notice to the start of the process. In this Bill, the coalition Government give just six years.

In setting out their policy objectives, the Government instance the need to take account of the increase in life expectancy, the need for spending on the state pension to be sustainable, the need for intergenerational fairness, and the need for fairness in the balance of support given by the working age population. We do not disagree with these aspirations, but consider that there is another policy objective that has been overlooked: fairness for those going through the transition, with sufficient notice for them to have the chance to adjust to changed expectations of receiving the state pension age at a later date. We know from the impact assessment that the timetable proposed in the Bill will affect some 5 million people; 500,000 will have to wait more than a year extra to receive their state pension, all of them women. Of these, 300,000 women will have to wait for more than 18 months and 33,000 will have to wait for two years. Contrast this with our proposal in this amendment, which affects 1.2 million fewer people. It will affect about the same number of men and women, and no one will have to have an increase in state pension age of more than a year. In terms of intergenerational equity, measured as a proportion of adult life spent in receipt of a state pension, the timetable we propose has a smoother transition to the long-term trend of 32.5 per cent for men and 34.8 per cent for women.

It is accepted that the Government’s proposal will save more in resources, although the savings do not begin to accrue until 2016-17. As the impact assessment makes clear, there is a judgment to be made. Indeed, we thought that it was a judgment that the coalition Government had made when declaring that the date when the state pension age started to rise to 66 would not be sooner than 2020 for women. Perhaps the Minister will take the opportunity to say why the Government have changed their mind on that issue. Just look at some of the unfairness. A woman born in April 1953 will be able to get her pension at 62 years and 11 months. A woman born in April 1954 will have to wait until she is 66. Many women and men affected by these changes would already have plans under way for hitting what they thought was their state pension age. We have heard from many who have reduced hours or given up work and taken on caring responsibilities for parents or grandchildren. The position for women is compounded because of the disadvantage that this generation of women has experienced in terms of lower earnings, interrupted careers and restricted access to private pension schemes. They have less flexibility to respond to the changes that see their state pension age rise by six years between 2010 and 2020, compared to just one for men.

I take this opportunity to particularise some of this unfairness. I am sure that other noble Lords have received, as we have, a host of representations from people and I would like to quote from two. One is as follows:

“Yes, I’m now 55, with only a small additional work pension on top of the State pension to come, because I wasn’t able to contribute anything extra to my employers scheme when I was younger—my husband & I separated and I was a single parent of 2 children and there just wasn’t the spare cash. I used to be a part-time worker—part-time women used to be discriminated against in not being able to participate in pension schemes (look up ‘Beswick Cases’ and the ‘Barber judgements’). So like many women the same age I’ve grown up in one era ‘Your husband will take care of you financially’, then things changed. I would have been able to retire with a full pension (such as it is) at 60; then, the Equalities legislation was moving it slowly towards 65 but at least I had due warning”.

Another person makes a point that I highlight:

“The law when I was younger prevented me from paying into a private scheme when I was not working or was working part time which happened because due to rearing children and the ill health of one of them, which he will have on and off throughout his lifetime. I feel it was a waste of money buying the extra NI contributions because since I bought them the government is now proposing to give me no pension at all for 2 of the years for which I thought I was buying a full pension”.

I pick up on that point in particular. The noble Lord will be aware of the buy-back opportunities—six years’ buy-back with class 3 contributions. He may also be aware of the further buy-back opportunities that were argued for and recommended to the House by my noble friend Lady Hollis. I imagine that more than a few people found themselves buying back extra class 3 contributions to secure a full state pension, on the assumption that they would give up working at a known date, given that the state pension age was set down in the 1995 Act. Now, like this person, they may find themselves waiting an extra two years for their state pension, continuing to work to be able to survive. By working, they would pay their national insurance contributions, and the buy-back that they had already made would be a complete waste of money. It seems to me a point to pick up and pursue further. I was alerted to it particularly by this representation. We need to reflect on what notice and information were given to people that caused them to go through these buy-back arrangements and to waste a not insignificant amount of money.

I also say to the noble Lord, Lord Boswell, that his amendments look on the face of it to be somewhere between the Government’s position and ours, but doubtless he will expand on that when he introduces them. It would be helpful if he could give us an analysis, in terms of the increase in the state pension age, of those affected who will have to wait less than a year for their state pension in comparison to the current arrangement, those waiting more than a year, those waiting a year and a half, and whether there are any up to the two-year mark.

[The Deputy Chairman of Committees]

My Lords, I should point out that, if this amendment is agreed, I cannot call Amendment 1A, for reasons of pre-emption.

[Lord Boswell of Aynho]

My Lords, perhaps I may respond to the very helpful introduction by the noble Lord, Lord McKenzie of Luton, and apologise to the Committee pre-emptively, as this is my first occasion in Committee, at least at this end of the Palace. I thank him for raising matters of substantial public concern in a moderate way, and shall try to talk around them and to explain matters connected with my own amendment. It will be obvious to the more perceptive Members of the Committee that, despite the heroic efforts of the Clerks with occasional interventions from myself, in this case it probably was the printer who was responsible for certain infelicities, one of which appears in Amendment 3A, which refers to 2010. This should of course be 2020. In Amendment 4A, there are two references to 2010 which should be 2020. Though I may take the Conservative Whip, not even I would claim to wish to legislate for the past. Those will be self-evident as slips of the pen.

If we unpack the principle of this, we always begin with a troubling element to do with disturbing the contributory principle, or disturbing people’s settled expectations. In a pure world, which ours is not, we would probably wish not to disturb anything from the moment when somebody entered the scheme as a young person and was paying on a certain assumption, in the hope that 40 years later they would receive their due pension. That was perhaps the philosophy of 1948. I do not think it is the practice of 2011. It is clear that, for a whole variety of reasons, successive Governments have changed that, particularly in relation to the inexorable march of longevity and the pressures on the public finances.

I was very grateful to hear the noble Lord, Lord McKenzie, making that point specifically, and of course we all make it. As he rightly intuited, my effort is in a field which is certainly somewhat exploratory, and I am exploring it in parallel with a number of Parliamentary Questions. We do not quite know the distribution, but we do know, on the Government’s proposals, that half a million women—of course it is only women—are affected by phase 1 of this change, and then men and women are affected by the move in the overall pension entitlement thereafter. There is an inhibition because it is felt, perhaps for reasons of concern about European sensitivities, that we are dealing with all the women in one go, and then moving forward together. The Minister may wish to comment further on that in a moment.