State Pension Reform

Lord Field of Birkenhead Excerpts

Monday 4th April 2011 Commons Chamber

[Steve Webb]

As my hon. Friend says, people want certainty about the future. We have said that we must move rapidly in respect of those reaching the age of 66. However, the new mechanism is designed not just to make changes more automatic, but to provide notice periods. Young people will not have that certainty, because life expectancy is always changing, but as people approach the state pension age, we want to be able to give them more certainty. That is part of our plans.

[Mr Frank Field (Birkenhead) (Lab)]

It is difficult to think of any statement that could be more important than one that commits a Government to paying a state pension above means-tested assistance level. The importance of this statement—which I welcome—stems from the fact that the income of many pensioners is below that level. Even if we take into account those who do not claim means-tested help, a large price tag will be attached to this reform. Will the Minister consider the contribution made by taxpayers through pension tax relief, which favours the wealthy over those who earn least, as one way of financing it?

[Steve Webb]

I thank the right hon. Gentleman for his welcome for the proposed system. It will be financed on a cost-neutral basis within the system: we will spend less money on means-testing and, for instance, savings credit, we will withdraw some of the very small payments that we currently make to people who do not even live in this country, and we will remove some of the highest accruals for the highest earners. We therefore do not need to involve tax relief. As the right hon. Gentleman will know, the Government have refined the previous Government’s plans, so tax relief will be less concentrated on the highest earners, but we have no further plans to change tax relief.