Pensions Bill

Baroness Turner of Camden Excerpts

Tuesday 3rd December 2013 Lords Chamber

[Baroness Turner of Camden (Lab)]

My Lords, this is a very important piece of legislation. It changes the way in which we shall have to think about retirement.

Of course, we all know that we are living very much longer, and the Government already insist that everyone will need to work longer before collecting the basic state pension. The Bill proposes a single-tier pension for those retiring from 2016 and, of course, contains provisions under which men and women will work to the same age—67—by 2026. The single-tier pension will be £144 per week above the basic level of means-tested support. As indicated, the pack provided by the Government sets out the ways in which it is proposed to transfer people to the new arrangements. That could turn out to be really quite complicated.

How does all this affect people, poorer people in particular? Many people in well paid jobs are quite happy to work for longer before retiring. Some actually want to do so. Things are often very different for those who have spent a lifetime in employment such as manual labour or cleaning, often very low paid work. A woman who has done that kind of work, such as hospital cleaning, over the years is very anxious to be able to give it all up at a reasonable retirement age.

Then there are workers in strenuous or difficult, sometimes dangerous, work. We should remember the fire service staff who threatened industrial action if their retirement age was raised, who were successful in getting what they wanted. Of course, there are other industries in which people will want to retire early. There should be provision for them to do so. A single-tier payment may be easier to administer but people are different and work patterns are different, and a good scheme should take account of that.

The Bill also deals with the effect of private pensions. These have changed over the years, as many people have said. I well recall my years as a trade union official, when we all aimed to have members in what were then called final salary schemes—now known as defined benefit schemes. These have to some extent disappeared, except in cases where there is strong enough union organisation to prevent that from happening. My own union, Unite, has had several successes in that direction. But generally speaking, the number of employees saving in workplace pension schemes has declined.

The previous Labour Government sought to deal with that through the introduction of workplace pensions with automatic enrolment. Many of us welcome that development and the information pack tells us that this is proving successful, with far fewer opt-outs than was at first imagined. The Government clearly accept that the state pension, even in the new guise of the single-tier pension, is not going to be sufficient to provide a reasonable living standard. People must be encouraged to save for retirement.

As we know, the reform of the state scheme is intended to provide a platform for private saving. It is accepted that the new workplace schemes with automatic enrolment must give people confidence to save. Therefore, the schemes must be good; hence the Bill provides for the establishment of a Pensions Regulator, presumably with the power to intervene in order to protect workers’ savings.

Then there is the matter of pension pots. People change jobs and could perhaps lose track of pensions from former employment. The Government propose a system of voluntary transfers—pot follows member. This was criticised in the Commons and a different system was proposed—the establishment of a sort of separate aggregator—but unfortunately this was not accepted. This was discussed earlier in the debate, particularly by my noble friend Lady Drake, who referred to the pots and what happens to them. There was, however, general agreement that the security of the funds—mostly money purchase, of course—was absolutely paramount.

It is clear that the Government’s view is that a good pension entitlement for the average individual would consist of the single-tier pension plus whatever is derived from the pot or pots from the workplace schemes under automatic enrolment. Therefore, the way in which this money is managed is crucial. How is it to be invested? Can it be left to the market? I think not. Then there is the possibility of annuities; again, these are not popular. This is a very important aspect of what happens to the money that is provided under these schemes.

As we know, wages have been virtually stagnant in recent years. There is evidence that many families are struggling to make ends meet between paydays. Workers on low pay may have periods of unemployment. Saving of any kind may be difficult for them. The last thing people think about in such circumstances is retirement schemes and saving for them. Low pay can possibly indicate penury during retirement—I hope not—and this we have to avoid.

The provisions in the Bill appear to provide some improvements in certain directions—on bereavement, for example—but this seems to be on a short-term basis and there could therefore be losers. I note that the present restrictions on the payment of state pensions outside the UK will remain in place for single-tier pensions. The provision is strongly objected to by people who paid their contributions while they were in this country but who have retired to countries where there is no reciprocal arrangement. This was also raised in the recent debate in the Commons, but again, no change was agreed.

There is little in the Bill about the disabled, except a reference in the information pack which seems to indicate that there will be no change in entitlement. However, some of it also indicates that you would have to be rather heavily disabled before that happened. That is very unfortunate and something that we ought to explore further because disablement is expensive and people who are disabled deserve special acknowledgement and special treatment.

As I have already said, there are a number of issues that must be further explored in Committee. The impact on poorer people, many of them women, must be examined. As indicated, many find saving very difficult, if not impossible. Schemes that rely on individual savings are unlikely to be acceptable to future generations. This is a very important Bill and we must spend a great deal of time in Committee looking at the issues we have raised this afternoon.