State Pensions: UK Expatriates
Lord Harrington of Watford Excerpts(7 years, 7 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I hope we would all agree—I know you have been in the Chair for only some of the debate, Madam Deputy Speaker—that we have had an interesting debate. Before I attempt to address the points that have been raised, I would like to thank those who have spoken. In particular, I thank my hon. Friend the Member for North Thanet (Sir Roger Gale) and the hon. Member for—I have been practising this for quite a long time—Ross, Skye and Lochaber (Ian Blackford) for securing the debate, which has been wide and varied. It concerns an important subject, which I do not take lightly.
The hon. Gentleman was very kind in the comments he made about me, and I would like to say something about the way he has conducted himself while I have been Pensions Minister. I have disagreed with him and the Labour party spokesman, the hon. Member for Stockton North (Alex Cunningham), on a lot of things, but we have also agreed on a lot of things. However, when we have disagreed, we have discussed things properly in this Chamber, in Committee and personally, and I wish all Government and Opposition relationships were like that.
On this particular subject, however, I have to say that I disagree with a lot of things that the hon. Member for Ross, Skye and Lochaber and my hon. Friend the Member for Worthing West (Sir Peter Bottomley) have said.
Sir Peter Bottomley
I know that that remark may have been addressed to just some of the things we said, but one of the things we said was that what is happening at the moment is not fair, not logical and not right. Is the Minister trying to say that it is fair, logical and right?
Richard Harrington
Well, it is about the subjectivity of those words, if I may say so. I will try to address some of the points he made, but I cannot successfully answer his cricket team question. However, given that our civil servants will probably have less to do over the next few weeks than they have had to do over the last few weeks, I will formally write to him. As a child, with “Wisden” and everything else, I would probably have been able to answer his question myself, but I am afraid I cannot do that now.
As I was about to say before I was hit for six by that intervention, the United Kingdom state pension is payable worldwide, regardless of the recipient’s country of residence or their nationality. I say that formally on the record because were I a member of the public watching the broadcast of this debate or reading it in Hansard, I could quite easily get the impression, when we talk about scandals and things like that, that people were leaving the country and not getting their pension at all. The state pension is paid to people who are entitled to it when they leave the country, but increased—“uprated” is the expression in this context—abroad every year only when the recipient is in certain areas: in the European economic area, Switzerland, or a country with which the UK has a specific reciprocal agreement that allows for uprating. This is a long-standing policy that has remained consistent for about 70 years, and, as has been said, it has been the policy of consecutive Governments of all persuasions.
I recognise that this subject arouses strong opinions, and some of the language used is very concerning. Please do not think, Madam Deputy Speaker, that I think that the language used has been improper in any way, but it is very strong language about people suffering hardship and so on.
Ian Blackford
Does the Minister appreciate that there is clear evidence that people who have gone to live abroad have come back because they do not feel they can manage on a frozen pension? There is clear evidence that people feel that they have been affected quite significantly by that situation.
Richard Harrington
I do not disagree with that, but people also return for many other reasons. When people decide to emigrate and live abroad, they do it for a number of reasons. They take into consideration the cost of living generally and the cost of property, or food, drink and entertainment—whatever it may be—and the pension is part of that. Similarly, when they decide to return, part of the reason might be whether their pension increases by the rate of inflation, but I suspect that there are many other reasons as well—for example, ill health, getting older, and family issues. I could not dispute what the hon. Gentleman said—in fact, I would never try to dispute what he says—but it is part of the picture and it is not right just to pick out that particular point.
I felt it my duty when taking on this portfolio to speak to as many people as possible. In November last year, I attended a meeting at Lancaster House—a very grand venue—where there were leaders from the overseas territories. It was a big Joint Ministerial Council. I met many of the people mentioned by my hon. Friend the Member for North Thanet, from Montserrat, the Falkland Islands and elsewhere. They were very impassioned people who gave a series of speeches that were basically saying the same thing. That has been reflected in what has been said today. Several hon. Members, including my hon. Friend, referred to people not having parliamentary representation. That point was made strongly by the hon. Member for Leeds North West (Greg Mulholland). I was born and brought up in that constituency, so I accept what he said about its minority communities; I was a descendant of one of them. I could only say to the people at the conference that I was there to listen. It seemed from what they told me that Ministers of all persuasions have politely declined such an invitation before. I know that this is a very impassioned debate. People do feel very strongly about it, and it is not something that I take lightly.
Several contributors, including my hon. Friend, said that because all workers pay their national insurance contributions towards their state pension there is a moral right that they should receive an uprated state pension wherever they live. Moral rights are very subjective, but I know exactly what was meant. However, the rate of contribution paid has never earned entitlement to the indexation of pensions payable abroad. That reflects the fact that the scheme overall is primarily designed for those living in the UK, and it operates on a pay-as-you-go basis. Contributions paid into the fund in any one year contribute to the expenditure in that year. That is the way that public finance works. The contributions provide a foundation for calculating the benefits, but they do not pay for those benefits.
The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) mentioned the national insurance fund. It is convenient to bring this up in debates, but in reality there is no surplus in the national insurance fund because it is all used to pay contributory benefits. It is basically a system of public accounting. The £16 billion that was mentioned is two months’ expenditure. It is just an advisory level for the fund suggested by the Government Actuary because it is a prudent working balance. It is not like having a bank account where we can say, “Oh, we’ve got a surplus—let’s use it.”
Ian Blackford
We all understand and accept that it is a pay-as-you-go system, but that does not detract from the fact that when someone pays national insurance, it is on that basis that they are earning entitlement from that mechanism. As for the national insurance fund, the surplus is actually £30 billion, and it needs to have—the Minister is right—two months’ cashflow within it, which is £16 billion. So the point remains the same—the money is there to do this.
Richard Harrington
I think, as we do on many things, the hon. Gentleman and I will have to agree to disagree on that, but we both fully understand each other’s arguments, I am sure.
The point about cost has been made very coherently. The Government generally take the view, of course, that the first priority is to ensure that older people in this country have an adequate income in retirement. Uprating all state pension payments in full to the rate currently paid in the UK, regardless of the recipient’s country of residence, would cost about an extra £500 million a year, increasing significantly over time. While that may not have been specifically argued for in this debate, people in favour of the motion are talking about a moral argument, not a legal argument. Many of us are here because we believe in moral arguments generally in our political lives, and I hope in our personal lives as well. That is why many of us do the job, so please do not think that I am pooh-poohing the idea of a moral argument. However, both systems of calculating this could be seen as being based on a moral argument.
This debate has been predominantly about so-called partial uprating. I understand this to mean not to uprate fully but to uprate the current level of state pension that the person is receiving through the triple lock or equivalent from a future date, and only pay uprating going forward with no arrears. I had to look at that very carefully when I saw that we were having this debate, because partial uprating can mean different things in different contexts. It is superficially a very attractive argument to say, “We could do this because it’s a few million pounds a year—tens of millions, not hundreds or billions.” It is not like the cost involved in the case of the WASPI women; the hon. Member for Ross, Skye and Lochaber correctly mentioned that some independent research has been done on that, which I have read very carefully. That would cost billions of pounds, but this is about tens of millions of pounds, which, on the face of it, sounds like small change within the full scale of Government expenditure.
Richard Harrington
The hon. Gentleman rarely makes me speechless, but his plea from a sedentary position to spend the money has done so. Perhaps he thinks that I am already Chancellor of the Exchequer; it is nice of him to imply that.
The Parliamentary Under-Secretary of State for International Development (James Wharton)
It is only a matter of time.
Richard Harrington
Maybe not in this life.
To return to the serious point, on the face of it, tens of millions of pounds does not seem a lot, but the annual costs of the policy would converge with those of full uprating in the medium to long term. That compounds the situation, because if we changed the policy now to either full or partial uprating, in 25 or 30 years, the vast majority of pensioners—they would be new pensioners—would receive pension payments as if they had been uprated for the whole time. Everyone knows that, whichever Government are in power after the election—I think the hon. Member for Leeds North West suggested that they would be of a certain colour, although I may have misunderstood him—resources are scarce, and Governments have to make judgments about how best to use them. That is what government is about.
Although the proposed spend each year might appear to be small, it would soon add up to a much more significant £500 million extra each year on about 500,000 pensioners. That might look to others as though the Government were disproportionately favouring those who have gone abroad. Much of that spending would not in fact increase the money that a poorer pensioner living abroad would receive. In Australia, for example, the age pension is means-tested, with the Australian Exchequer in some cases keeping up to 50%. New Zealand, too, requires people with overseas pensions to claim them; they are then taken into account, and the New Zealand benefit or pension is reduced by the amount of UK pension. In addition, since most people who move abroad to those countries do so before they have reached pensionable age, most would have been able to build up decent pension provision in the country to which they emigrated, if they went when they are younger.
For most people, the decision to move abroad is voluntary; it remains a personal choice dependent on the individual’s circumstances. The Scottish National party spokesperson, the hon. Member for Rutherglen and Hamilton West, said in her summing up that people may not have been aware that they were moving to a country with different pension arrangements. Others have mentioned the line and short distance between Canada and America. However, people who move abroad find out about so many things, including visas; they have to.
Sir Gerald Howarth (Aldershot) (Con)
I apologise to you, Madam Deputy Speaker, and to the Minister for not having attended this debate. I had intended to do so, but I had other commitments. As I shall shortly be leaving the House, perhaps I could put on the record my support for our overseas pensioners, who have been badly treated. Many of them have almost been obliged to move abroad for family reasons, so it is not the case that they all made a voluntary choice. In many cases they felt obliged to move to support their families and they feel trapped. They also feel a sense of betrayal.
Richard Harrington
I perfectly accept that in some cases people have no practical choice, but many who emigrate decide to do so for a number of reasons, including personal ones. When people move away, pensions are, by and large, part of their calculations, as is the cost of living.
The hon. Member for Ross, Skye and Lochaber was eloquent, as usual, in making his point about uprating the state pensions of people residing in the European economic area and Switzerland. It is a requirement of UK law that those payments be the same as those made in the UK. However, as everyone is aware, the article 50 process is under way, and in accordance with what happened in the referendum and everything that has been discussed in this House, the UK is leaving the European Union. The Prime Minister has made clear that securing reciprocal rights is one of the top priorities. The rights and entitlements that will apply following the UK’s exit, such as those relating to the UK state pension paid to individuals living in member states, are subject to the wider negotiation on our future relationship with the EU. The Government have made it clear that we plan to strike an early agreement on the rights of EU citizens living in the UK and, obviously, vice versa. As the Prime Minister has said, it is in no one’s interests for there to be a cliff edge when we leave the EU, so the current laws and rules will, wherever practicable, continue to apply, to give certainty to individuals and businesses.
Sir Peter Bottomley
We understand the limitations on the Minister, and I hope that anything we think will not be taken personally by him or anyone else. I remind him of the Old Age Pensions Bill debate on 10 May 1907, when the Member moving the Bill’s Second Reading said that Chancellors always want to stop people getting “Money! money! money!” My hon. Friend has said that we are now likely to make decisions that will affect hundreds of millions of people, so surely now is the time make a small change for fewer than 500,000 people. I ask him to commit to revisiting the issue after the election and to looking at it properly.
Richard Harrington
I thank my hon. Friend for his intervention. Perhaps he was present during that debate in 1907; I was not, but I look forward to reading about it.
Those who are eligible for a UK state pension can have their pension paid wherever they choose to live. The rules governing the uprating of pensions are straightforward, widely publicised and have been the same for many years. The Government’s position remains consistent with that of every Government for the past 70 years. The annual costs of changing the long-standing policy will soon be an extra £500 million, which the Government believe cannot be justified.
Madam Deputy Speaker (Natascha Engel)
If the Minister would like to respond, he is welcome to do so.
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I will have a go at responding to the hon. Gentleman’s question. I do not know the answer to it, but I will find out straight away and communicate it to him. I suspect that this is a matter that is decided by the civil service based on previous protocols about purdah and so on, but I do not feel experienced enough to give him the answer that he wants and deserves.
Sir Peter Bottomley (Worthing West) (Con)
Further to that point of order, Madam Deputy Speaker. The Minister has been very clear and helpful. If the practice is for such helplines, which are for our constituents rather than for us, to be closed down before Parliament has stopped sitting—before we stop being Members of Parliament—may I suggest, through you, that those who are listening should change the practice and make sure that that happens when Parliament is dissolved, and not simply because an election has been called?
Madam Deputy Speaker
If the Minister would like to respond to that, it would be very helpful.
Madam Deputy Speaker
I thank all hon. Members for their points of order, and I thank the hon. Member for Stockton North (Alex Cunningham) for raising this point. It is important, and I am grateful to the Minister for having responded so positively to it. We will leave it there for now.
Pension Schemes Bill [Lords]
Lord Harrington of Watford ExcerptsWednesday 29th March 2017
(7 years, 7 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I beg to move, That the Bill be now read the Third time.
We return to this Bill after last Wednesday’s traumatic events. My thoughts and sympathies, and those of all the House, are with those who were affected. I take this opportunity to thank hon. Members from both sides of the House and the House staff for their support and professionalism in what was a very difficult time for us all.
I am pleased to see Madam Deputy Speaker in the Chair, as she has not heard any of this before. This Bill focuses on master trusts, introducing a new authorisation regime for them and setting out how they must satisfy the Pensions Regulator of certain criteria before they can begin, or continue, to operate.
The criteria were developed in discussion with the industry, and respond to specific key risks. Although the Bill provides some detail, more will be set out in regulations after further consultation with the industry and others. The Bill gives the regulator new powers to supervise master trusts, and to step in when schemes risk falling below the required standards. It also gives the regulator additional powers when a master trust experiences a key risk event. A scheme that has experienced such an event will be required either to resolve the issue or to wind up. As well as giving the regulator new powers, this Bill supports continuity of savings for members, protects members when a scheme is to wind up, and supports employers with their automatic enrolment duties.
To protect members of existing schemes, some aspects of the regime will have effect from 20 October 2016. Schemes are required to report triggering events to the regulator, and there are restrictions on certain charges until the event is resolved. The Bill also amends existing legislation so that regulations can override relevant contract terms that are inconsistent with those regulations. We intend to use this provision, along with existing powers, to make regulations that cap early exit charges and ban member-borne commission in some occupational pension schemes.
When this Bill was introduced in the other place last October, it was welcomed across the pensions industry as an essential piece of legislation that would protect the millions of people now saving for their retirement through master trusts. I am pleased to say that the Bill has been broadly welcomed by those in all parts of both Houses. We have listened to the points raised in both Houses, and have continued to engage with stakeholders. I can confirm that we have brought forward a number of Government amendments to address their concerns. In the other place, amendments in Committee mainly related to how the regulator would enforce the new authorisation regime.
Amendments on Report in the Lords focused on regulation-making powers in the Bill, in acknowledgement of the report from the Delegated Powers and Regulatory Reform Committee. One amendment inserted a power to make limited consequential changes to legislation to ensure that the law works as it should. We also made a change to allow the provisions on fraud compensation in the Pensions Act 2004 to be modified for master trusts.
On Third Reading in the Lords, we made one minor technical change to clarify that regulations on scheme funders’ accounts may require them to be audited. In Committee in this House, we agreed further changes. First, the Committee removed a clause that had been inserted after a narrow vote on Report in the other place, which provided for a scheme funder of last resort to meet the costs when a master trust is being wound up without the necessary funds to transfer the accrued benefits. We discussed that once again on Report last week, when the House accepted the Government’s argument that this additional provision is unnecessary.
In response to a point raised in the other place about an unintended consequence of the Bill, we made amendments to enable a scheme funder to engage in activities in relation to any part of the scheme, not just the money purchase section. The original requirement in the Bill that the scheme funder be a separate legal entity, and carry out only activities directly relating to the master trust scheme in question, was amended to address concerns about the impact of the requirement on business. The amendments enable scheme funders to operate more than one master trust, and also give the Secretary of State the flexibility to make exceptions to the requirement that scheme funders’ activities be limited to the master trusts of which they are the scheme funder or prospective funder.
I thank hon. Members on both sides of the House for their contributions, including the shadow spokesman, the hon. Member for Stockton North (Alex Cunningham), and the hon. Member for Ross, Skye and Lochaber (Ian Blackford)—not least because I can now say the name of his constituency without reading it. I particularly thank the Bill team from the Department for Work and Pensions, and everyone who has contributed to making this Bill an excellent piece of legislation.
Oral Answers to Questions
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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Seema Kennedy (South Ribble) (Con)
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
The Government are committed to providing free and impartial guidance through Pension Wise to help people make informed and confident decisions about how they use their defined contribution pension savings in retirement.
Seema Kennedy
I am grateful for that answer. Will my hon. Friend reassure me that the Government are taking steps to protect people from being scammed out of their savings as well as ensuring that people have access to information to help them to decide how to draw down their pension savings?
Richard Harrington
My hon. Friend is absolutely right to ask that question. The Government take the threat posed by scams very seriously indeed. We run campaigns to highlight the risk posed by scams to savers, and we have established a cross-government taskforce to gather and share intelligence, and to co-ordinate enforcement action. We have also consulted on further measures to tackle scammers, including a proposal to ban cold calling in relation to pensions. Our next step will be announced very soon.
Chris Leslie (Nottingham East) (Lab/Co-op)
Well, that is the point I was going to ask the Minister about. Will he tell us when he will crack down on cold calling? These people are trying to scam others out of their hard-earned life savings, taking advantage of the notion that there are these freedoms, but potentially putting pensioners at great risk. When will the legislation be brought forward?
Richard Harrington
As is to be expected, the hon. Gentleman asks a pertinent question; very soon, is the answer.
Mr Philip Hollobone (Kettering) (Con)
Preying on elderly people in order to take advantage of their pension pots by giving them bad advice is a despicable crime. Is the Minister satisfied that the number of prosecutions of those who do this frankly evil activity is nearly enough?
Richard Harrington
I would like to be able say that it is enough, but I do not think it is. The steps we intend to take should make prosecutions for scam cold calling much easier. If I am asked the question again in the future, I hope to be able to answer in the affirmative.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
On the issue of accurate and clear information, the Cridland report, published last week, stated:
“An increase of the State Pension age every ten years—and by only one year per decade—represents an appropriate pace of change”.
Does the Minister agree with that statement? If so, will he revisit the issue of the WASPI women, who face an increase in the state pensionable age of more than five years this decade?
Richard Harrington
I know that the hon. Gentleman has read the Cridland report in detail, and I thank him for doing so. It will suffice to say that the Government’s response will be published at the end of May and will be comprehensive. As far as the WASPI women are concerned, he knows—I have said this many times at this Dispatch Box and elsewhere—that the Government have made the concession that they are going to make in terms of transitional arrangements from the Pensions Act 1995. I have no further news. That is it.
Mr Alan Mak (Havant) (Con)
Reducing fees and charges levied by pension companies is important to helping customers to get the most from their investments. Will the Minister update the House on what progress has been made in that area?
Richard Harrington
My hon. Friend and I have discussed the matter, and I am pleased that he has highlighted it. There has been consultation on the subject, and the Government will make an announcement ourselves and through the regulator very soon.
Alex Cunningham (Stockton North) (Lab)
The Government missed an opportunity this year to tackle a wide range of issues in the pensions industry, but they chose to ignore most of them, instead bringing forward the narrow Pension Schemes Bill. The Secretary of State then failed to further his own agenda by instructing his Ministers to resist any attempt to introduce transparency, member engagement and greater clarity on costs. Why does he choose to protect the industry instead of savers? What will the Government do to correct this failure and help us all to build trust in our pensions industry?
Richard Harrington
I thank the shadow Minister for voting for the Bill on Second Reading, and for his generally constructive approach to it. As the hon. Gentleman well knows, the transparency agenda is part of a much broader agenda, and the Government will make a proposal very soon.
Martin Vickers (Cleethorpes) (Con)
I am currently dealing with two constituency cases in which old people have been robbed of their life savings. In both cases, they have been disappointed with the police response. Will the Minister’s cross-departmental work include contact with the Home Office and individual police forces to ensure that more work is done to address this?
Richard Harrington
I can confirm that the police and anti-fraud authorities are involved in this cross-governmental body.
Justin Madders (Ellesmere Port and Neston) (Lab)
Diana Johnson (Kingston upon Hull North) (Lab)
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I give the same answer I gave to the hon. Member for Ross, Skye and Lochaber (Ian Blackford): the Government have been clear that the introduction of further transitional arrangements cannot be justified, given the imperative to focus public resources on helping those who are most in need. There are no plans to go beyond the £1.1 billion concession introduced when Parliament considered the changes.
Rosie Cooper
In response to the Minister’s answer, I ask him whether he will respond to the comments of his Government’s former Pensions Minister Baroness Altmann, who said she regretted the Government’s failure to properly communicate state pension age equalisation, an approach she described as
“a massive failure of public policy”,
and the comments of Steve Webb, another of their former Pensions Ministers, who said that the last Government made a bad decision on changing the state pension age? Will the Minister look at rectifying that?
Richard Harrington
In the latter case, Steve Webb was Pensions Minister at the time, so I do not think there is much further I can say about that.
There were very extensive communications on the 1995 changes. Millions of people checked their state pension requirements; it was publicised and leaflets were produced. This has been said many times on the Floor of the House, and I simply reiterate it.
Diana Johnson
It is not good enough for the Minister to say, as he did earlier, that that is it for the WASPI women and that everything has been done that is going to be done. Has he given any consideration to the recommendation from the Work and Pensions Committee talking about allowing the WASPI women the chance to claim their pensions early at a reduced rate, which I believe is cost-neutral and fits with other areas where the Government have allowed pensioners to take their pensions earlier at a reduced rate?
Richard Harrington
The proposal is not cost-neutral; I must make that clear. It is very impractical and it is impossible to do in the time concerned. I have made it very clear that the transitional arrangements that were made when the Pensions Bill went through Parliament are all that will be provided.
Sir Desmond Swayne (New Forest West) (Con)
What was the minimum notice received by those facing the maximum increase in age?
Richard Harrington
These changes took place under two Acts of Parliament: the Pensions Act 1995, which brought in the main change, and the Pensions Act after that. I want to make it clear that after the 1995 Act, 18 months was the maximum increase.
Graham Evans (Weaver Vale) (Con)
Last week, the John Cridland report indicated that there may well be an increase in the pension age. As life expectancy rises, it is right and proper for any Government to consider increasing the state pension age. However, will my hon. Friend reassure the House that if there are indeed any changes to the state pension age, they will be communicated in a timely and appropriate manner, so that those affected know about them?
Richard Harrington
The Government will be making a full response to the Cridland report. The review is forward-looking and, I must make it clear, will not make recommendations for any changes to happen before 2028. That was a commitment in the 2013 autumn statement.
Rob Marris (Wolverhampton South West) (Lab)
Richard Harrington
There is a lot happening in pensions at the moment. The point the hon. Gentleman mentions in relation to the Chancellor of the Exchequer is something completely different, but there will be no change to the transitional arrangements at £1.1 billion.
Alex Cunningham (Stockton North) (Lab)
Labour will oppose the earlier increase in the state pension age and the end of the triple lock, recommended in last week’s Cridland report, but we welcome the statement from John Cridland that at least 10 years’ notice should be given of any age increase, so there is yet another chance for the Minister. Do the Government agree with Cridland? If they do, will the Minister now admit that they got it badly wrong with the WASPI women and at least back Labour’s proposals to extend pension tax credit?
Richard Harrington
As I said before, the Government will respond to the Cridland review by the end of May.
Steven Paterson (Stirling) (SNP)
Thangam Debbonaire (Bristol West) (Lab)
The Fawcett Society found last year that 25% of women over 30 are saving nothing for retirement, compared with 15% of men. What does the Secretary of State think is responsible for that, and what is he doing to change it?
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
Automatic enrolment was designed specifically to help those who were under-represented in pension savings, including women. With the current rate of £10,000 a year, 70% of the new people coming into the system in 2017-18 will be women.
Kate Green (Stretford and Urmston) (Lab)
Six out of 10 people with epilepsy who were migrating from DLA to PIP and were surveyed by Epilepsy Action saw their benefit removed or reduced. That compares with two out of 10 people who are migrating overall. Are Ministers confident that assessors and decision makers properly understand the fluctuating, sporadic and life-limiting condition of epilepsy, so that they can make the right decisions?
State Pension Age: Independent Reports
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
In order to keep the future state pension sustainable and fair for future generations, the Government introduced a regular and structured method for considering future changes in the state pension age as part of the Pension Act 2014, section 27.
In line with this method, in November 2016 the Government commissioned the Government Actuary to examine two scenarios for specified proportions (32.0% and 33.3%) that reflect the core principle announced in the autumn statement 2013 that people should spend “up to one third” of their adult life drawing a state pension.
The Government also commissioned an independent review of state pension age to look into wider appropriate factors around reviewing the state pension age, led by John Cridland CBE.
Today I will lay both these reports before Parliament, and would like to take this opportunity to record my thanks to the Government Actuary and John Cridland and their respective teams for their contributions.
The Government will now consider both of these reports very carefully and will present their first review of the state pension age to Parliament in May 2017. The review will be forward looking and will not recommend state pension age changes to be made before 2028. Any proposed changes would be brought for parliamentary consideration and would require primary legislation.
[HCWS552]
Pension Schemes Bill [Lords]
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I thank the hon. Member for Stockton North (Alex Cunningham), from Her Majesty’s loyal Opposition, and the SNP spokesman, the hon. Member for Ross, Skye and Lochaber (Ian Blackford), for their amendments. I hope that everyone who has followed the debate in this House and in Committee will agree that the Government’s attitude has not simply been to oppose all amendments for the sake of it. I give hon. Members my word that everything has been considered. It is the Government’s job to consider the lobbying from the sorts of organisations that the hon. Member for Stockton North mentioned. I have met representatives of most of them, as I am sure the hon. Member for Ross, Skye and Lochaber has done. It is the Government’s job to weigh up everything and make a decision.
I am really quite disappointed by the fact that today, we are almost exclusively revisiting the amendments we debated in Committee. My arguments remain unchanged, although that does not mean that I am going to sit down and ignore the contributions of the previous speakers.
Richard Harrington
I do not think that that would be the correct thing to do. I intend to go through the amendments in detail and answer some of the questions that have been asked in good faith; I will try to answer them in the same spirit.
New clause 1, tabled by the hon. Member for Stockton North, is about the scheme funder of last resort. It has been discussed in the other place and extensively in Committee, and my officials and I have given it a lot of consideration. It would principally require the Secretary of State to establish a funder of last resort to meet the costs associated with the transfer of members out of a master trust should a triggering event occur. On the surface, the argument seems compelling. I met Baroness Drake and others in the other House before the Bill came to this House. I considered the proposal with a very open mind, and I thought that it was the most significant of all the points that were made. I want to place on record the fact that the contributions from noble Lords, across parties, have been very useful. I pay tribute to Baroness Drake, with whom I have discussed this several times. There are honourable disagreements, however, in which neither position is ridiculous. In the end, Government have to decide. That is why I cannot give the Opposition the comfort for which they ask.
The whole purpose of the regime introduced by the Bill is to mitigate the very risk about which the hon. Member for Stockton North is concerned. He is right to be concerned about it. Various clichés have been used at various points in proceedings on the Bill, usually involving nuts, sledgehammers and other such things. I would prefer to say that it is a question of being proportionate, or not being disproportionate. I think that that sums it up.
Before a master trust is authorised, the Pensions Regulator has to be convinced it has sufficient funds to meet the cost of a triggering event. Remember, Mr Deputy Speaker—I am sure you do, as you remember everything—that this does not involve pensioners’ money, but the scheme or organisation running the fund. The Pensions Regulator must ensure that the organisers of the trust have sufficient funds to meet the cost of a triggering event. Should it fail, it will have the money to transfer out to another scheme. The regulator will monitor the situation on an ongoing basis to ensure the funds remain available.
Currently, the market is responding well to deal with existing master trusts that wish to exit before authorisation. The threat of the regulation in the Bill is making smaller master trusts consider whether they wish to part of this new regulated world. Several master trusts have already left the market in an orderly fashion. The regulator is confident that currently there are none that could not afford to transfer out members. That is very important and I hope the hon. Member for Stockton North will take that into consideration when deciding whether to press the new clause to a Division.
We are working with the regulator on non-legislative measures to address concerns about potential liabilities of trustees and receiving schemes that might arise if the record of a master trust in wind-up is poor. Hon. Members should be aware that we have a system of regulation precisely to ensure this does not happen. I view in a different way a survey I believe the hon. Gentleman mentioned in Committee from Pension Professional, which found that 50% of those surveyed did not want a scheme of last resort, as opposed to 31% who said they did. He mentioned Standard Life’s view. I accept that it is the view of industry players that they would much rather the Government step in and deal with it—that is natural; if I were in their position I would too—but we have spoken to institutions and people involved in auto-enrolment, master trusts and so on, and my clear impression is that plenty of players would bite their hand off for any schemes they could get hold of. From their point of view, taking on members involves very little cost because they are already set up and running the schemes. They seem desperate to take on these schemes.
Alex Cunningham
The Minister is taking great comfort from existing measures, but there is still no 100% guarantee that there will be somebody to pick up the costs in the event of a trust failure. We could see a new trust go through the authorisation process but still fail through bad management, mismanagement, fraud or whatever. Who will pick up the pieces in that situation?
Richard Harrington
We have to deal with the reality of the situation; that is not happening. Yes, anything could happen. We all know in life that things happen. Parliament deals with things that happen that no one expects. As the Minister with responsibility for pensions, I am convinced that in the view of the industry, the regulator and the types of institutions that would willingly take on failing master trusts, there is no need for the Secretary of State to have in his desk-drawer armoury the money or the weapons to deal with it. This is a problem that really does not exist.
The hon. Gentleman says it is all left to chance. Well, it is not left to chance. We have a finite number of master trusts that exist now thanks to the support of the Government and the Opposition for the Bill, which I hope will be enacted as quickly as possible— I think everybody wants that—so it is a finite problem. I am not an accountant, but it is not a contingent liability that could happen in years to come. Hopefully, within two years a clear regulatory system will be in place and the regulator has made very clear what trusts exist. We have taken quite a lot of care to ensure that this will not happen. I feel that the measures suggested in the new clause are totally disproportionate to the problem. For those reasons, I urge the hon. Gentleman to withdraw it, although I do not believe he will. [Interruption.] I am pleased to see that at least I have served to amuse Opposition Front Benchers.
New clauses 2, 3 and 4 stand in the name of the hon. Member for Stockton North and relate to member engagement. In Committee, in earlier debates and in conversations both on and off the record and in general to everyone who is concerned, I have made it clear, as hon. Members would expect me to do, that member engagement is important and that members should be encouraged to develop a strong sense of ownership in their pension savings. However, I remain of the view that the new clauses are unnecessary. I know that the hon. Gentleman is expecting me to say that, because we have discussed these points before.
My main rebuttal would be to remind the hon. Gentleman that the majority of master trusts are subject to the rules on trustees and the regulations of governance. Those regulations require that the schemes must have at least three trustees, and the majority have to be independent to provide services to the scheme. I agree that there must be an open and transparent appointment process for recruiting independent trustees, but current arrangements ensure that members have access to appropriate information to make decisions about their pension scheme. Those include a mandatory annual benefit statement; for most members, a statutory money purchase illustration, which gives them a projection of their pension in retirement. The hon. Gentleman says it should not be done on request, but it is available—that includes the trustees’ annual report, the chair’s statement and the statement of investment principles. The Pensions Regulator publishes guidance for trustees on communicating effectively and transparently with members.
I remind Members that all trustees have fiduciary duties and other legal requirements. Some master trusts are developing innovative ways of engaging with their members without the need for over-prescriptive statutory requirements, many of which—I say this respectfully—are of a different era, including holding general meetings that mean that people are expected to travel all over the country and everything like that.
I wish to discuss quickly the points made about the auto-enrolment review. In summary, the purpose of the review is precisely to discuss the points raised by the hon. Member for Stockton North. We are looking extensively at including self-employed people and people on lower incomes. He mentioned carers, so I should point out that all carers who are employed are now treated exactly the same as other people who are employed. If they fit the criteria, they will not be. I would not exclude looking at everything else, but the review is far broader than is required under the law.
The hon. Member for Ross, Skye and Lochaber tabled new clause 6, and wants to introduce a power to regulate so that exit charges can be capped. As I have said, the power already exists, because we intend to use schedule 18 to the Pensions Act 2014, as amended by clause 41 of the Bill, alongside existing powers, to make regulations to cap or ban early exit charges in occupational schemes, including master trusts. Existing members of occupational schemes who are eligible for pension freedoms will have charges capped at a maximum of 1%. It is not fair to exclude all charges, because there are costs involved in exit.
New clauses 7, 8 and 9, which were introduced as eloquently as ever by the hon. Member for Ross, Skye and Lochaber, are designed to make changes to the provisions in the Pension Act 2014 that address the issue of employer debt in defined-benefit schemes. As he said, I have met representatives of the plumbers UK scheme, stakeholders generally, employers and employees. Let me make it clear that the issues are raised in the Green Paper on security and sustainability in our defined benefit pension schemes, and there is a roundtable of representatives from the relevant schemes precisely to look at what changes to legislation might be needed.
It is a complex and technical problem, but there is no perfect solution, because each involves one of three parties taking responsibility for the debt: working members, retired ones and the PPS. Each has its own problems, but I give the hon. Member for Ross, Skye and Lochaber my word on this, and I congratulate him and his party colleagues on the work they have done on this issue. There is no need for fears; we will make progress. I trust that the hon. Gentleman will therefore not press the new clauses.
We dealt in Committee with the minimum requirement for annual reporting on administration and so forth, but we shall have to agree to disagree on this. We are committed to making regulations requiring information on charges and transactions costs to be provided to Members and to be published in the course of this Parliament. We will consult this year on the publication and disclosure of such information to members. We are consulting only on how rather than if we will require disclosure. I read the Financial Conduct Authority’s asset management markets study, and I sometimes think that the hon. Member for Stockton North and I are probably the only people who have read it in full detail. I fully commend it, as I have told the FCA, and we fully intend to take action on this matter. In short, the Government already possess the necessary primary powers and are well on the way to achieving the hon. Gentleman’s stated purpose, so I urge him to withdraw the amendment.
Amendments tabled by the hon. Member for Ross, Skye and Lochaber deal with scheme funder requirements. I listened carefully to what he said. He adds to the requirement in clause 8 for the master trust scheme to have sufficient financial resources for the scheme funder, but that is not required because the regulator’s assessment already has to take into account matters to be specified in regulations, which will include insolvency risk, the enforceability of any funding commitment and whether the scheme funder is subject to any prudential capital requirements. I do not believe that we need to expand the range of activities beyond that. Amendments 6 and 7 would expand the range of activities that a scheme funder can undertake by allowing it to carry out any activities apart from those that are restricted. The Government amendments tabled in Committee mean that the scheme funder is no longer restricted solely to activities relating to the master trust. I remind the hon. Gentleman—he has mentioned the Association of British Insurers—that the ABI
“welcome the cross-party consensus of the need to address the issue and the common-sense approach the Government has taken to reflect its concerns”.
In short, these amendments are not needed, so I very much urge the hon. Gentleman not to press them.
Amendment 2 would require the trustees to notify scheme members that a triggering event has occurred and of other information to be set out in regulations. I am sure you are aware, Mr Deputy Speaker, that a triggering event is a change in circumstances that poses a risk to the scheme. I accept the importance of informing members well ahead of anything that directly impacts on them. Trustees can inform members at the point of the triggering event, if they judge that this is appropriate. The Bill already requires that if the scheme does proceed to wind up, it must inform members. I feel that the amendment is well-meaning but inappropriate. It could be costly and it could frighten members for no reason, because the system of requiring them to be informed later in the process is already in place. Once again, I ask the hon. Member for Stockton North not to the amendment.
I do the same with respect to pause orders, which were mentioned by both the hon. Member press, for Stockton North and for Ross, Skye and Lochaber—it seems that I have mastered the name of that constituency by Report, which goes beyond the call of duty. The amendments would require the contributions that cannot be paid into a master trust in the interim period to be held by the employer in some sort of special account. Here I am talking about the amendments tabled by the hon. Member for Ross, Skye and Lochaber—and I said that in one sentence.
Amendment 4 tabled by the hon. Member for Stockton North removes the provision to halt payments to members from a scheme during a pause order. Let me make it clear that the Government’s position is that employees should retain the contributions made during a period, and receive a refund from their employer if those contributions have already been deducted but cannot be paid over to the scheme. We have been clear and everyone agrees that this is a rare and time-limited situation, which has a low risk of occurring, yet quite a big burden would go with it.
Alex Cunningham
On payments made during a pause order, I was referring to payments from the pension. I was talking about the payment of pensions, not the refund of contributions to the employee.
Richard Harrington
I thank you for that clarification. No, I do not thank you, Mr Deputy Speaker; I thank the hon. Member for Stockton North. The trustees can decide—they have to decide—when they wish to notify members of the pause order; it is not like it does not exist. I remind the hon. Gentleman that the Pensions Regulator can direct the trustees to notify the members at any time if they deem it necessary. That is a really important point. The power is already there; it is not as if it is going away.
With all that said, I hope that I have considered the amendments carefully. I hope that I have made effective arguments and that the hon. Member for Stockton North will not press his amendments.
I am satisfied that the Bill has been improved by amendments made in Committee—largely, I would like to say, in response to Opposition arguments. Once the Bill becomes an Act, I believe it will provide effective protection for the millions now saving in master trusts, largely as a result of the success of automatic enrolment. I hope that this House will be content to leave it unamended today.
Question put, That the clause be read a Second time.
The House proceeded to a Division.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I am now going to suspend the sitting. The House is now suspended, but please wait here.
Pension Schemes Bill
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
Today I will deposit in the House Libraries a memorandum on the application of Standing Order No.83L of the House of Commons Relating to Public Business to the Pension Schemes Bill, as amended. This memorandum sets out that there has been no material amendment at Commons Committee, i.e. the outcomes of the analysis remain precisely the same as on introduction.
[HCWS544]
Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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The Chair
The Minister may move the motion and then make a speech accordingly, but if he moves it formally, I will invite the Opposition to speak.
Richard Harrington
I beg to move,
That the Committee has considered the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017.
I am delighted to serve under your chairmanship, Mr Hanson. For the clarity of the record, I did not mean moving the motion formally in the parliamentary sense; I meant doing so in a formal manner, which means being properly dressed and addressing the Chair properly. I hope that I have dealt with that issue satisfactorily.
The order was laid before the House on 2 February 2017. It reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds required under the Pensions Act 2008. The review considered both the automatic enrolment earnings trigger, which determines the point when someone becomes eligible to be automatically enrolled in one of the qualifying workplace pensions, and the qualifying earnings band, which determines those earnings of which the enrolled employee and their employer must pay a proportion into a workplace pension. The order sets a new lower and upper limit for the qualifying earnings band, and is effective from 6 April 2017. The earnings trigger is not changed, so no further provision is required in the order; it remains at the level set in the automatic enrolment threshold review order for 2014-15.
The automatic enrolment programme has received support from right hon. and hon. Members on both sides of the House. It was implemented under the previous Labour Government and came about as a result of the Pensions Commission, which was a successful and, I think it is fair to say, non-political body. The programme is working. More than 7 million people have already been enrolled and more than 400,000 employers have carried out their duty to provide a workplace pension for their employees. We are now in the final year of roll-out, which I think is the most challenging phase, because the majority of the employers joining are small and micro-employers. Against that backdrop, it is more important than ever to maintain simplicity and consistency for employers. That is the reason for this year’s order, which will provide those things through to the end of roll-out in February 2018.
I am pleased to say that we are at an exciting juncture in the development of automatic enrolment, as my Department is embarking this year on a review of the policy and its operation. It is the right time to reflect on the successes we have achieved so far, and also to look to the future. We are taking stock of the current position and considering how to build on what has been done, so that AE continues its success into the future. I think we all look forward to the result of the 2017 review, but given that it has just begun, it is important that this year’s threshold decision does not pre-empt the outcome. Nevertheless, we must obviously continue the principle of increasing opportunity for people to make meaningful savings in a workplace pension, while balancing costs for employers.
I shall describe the impact of the order, and will first consider the qualifying earnings band. Past reviews have generally linked it to the national insurance lower and upper earnings limits, and I think that is common sense and has been uncontroversial. As signalled in my written statement of 12 December 2016, the order will, as its predecessors did, align both the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits, so that the trigger is the same: £5,876 for the lower limit and £45,000 for the peak.
Maintaining the alignment with national insurance thresholds at the points where contributions start for low earners and are capped for higher earners—remembering that employers are the conduit to the pension—fits exactly to existing payroll systems, without further changes. The decision ensures simplicity and minimises the administrative burden of compliance for employers in 2017-18, while maintaining consistency for hundreds of thousands of small and micro-employers who are implementing AE over the coming year. It is done in the way they expect it to be done, and there is consistency.
The order does not change the earnings trigger, which remains at £10,000, as set in the 2014-15 order. The maintenance of that trigger and anticipated wage growth mean that we expect about 70,000 additional individuals to now meet the earnings criteria and be brought into the automatic enrolment population. Individuals earning below the £10,000 trigger, but above the lower earnings threshold, can still have the option to opt-in to a workplace pension and benefit from their employer’s contributions, should they wish. The decision to maintain the earnings trigger at £10,000 will increase the number of low earners who meet the earnings criteria and who are therefore automatically enrolled into a workplace pension.
Rob Marris (Wolverhampton South West) (Lab)
Paragraph 7.4 of the explanatory notes says:
“The Secretary of State has re-considered all the review factors against the latest analytical evidence”.
Paragraph 18 of the impact assessment also says that
“the Secretary of State has re-considered all the review factors against the latest analytical evidence”.
To my mind, the impact assessment does not include that analytical evidence. Will the Minister tell us what that analytical evidence is and where it be found?
Richard Harrington
If the hon. Gentleman will have a little patience, I intend to cover that a little later in summing up. Perhaps he will intervene again, and if he is not satisfied, I will write to him with more detail. I hope that is okay; I am not fobbing him off.
The important thing to remember is that the decision to maintain the alignment of the lower and upper earnings qualifying bands with those for national insurance contributions is about maintaining simplicity and consistency for employers, because this is a crucial stage. It does not mean that that will not change in the future—that is what the review is for—but, for the moment, we feel that this is an interim arrangement, at the end of the roll-out, rather than at the beginning of the next phase, which I hope will happen, depending on the outcomes of the review.
In the end, because of wages going up, total pension saving—that is what everyone is interested in—is expected to increase by £71 million. The order therefore ensures that automatic enrolment will continue to provide greater access and opportunity for individuals to save in a workplace pension and build up meaningful pension savings. I commend the order to the Committee.
Richard Harrington
I would like to respond in full to the hon. Member for Stockton North. I accept that some of the matters that he and I discuss regularly in the main Chamber are really meant for outside this room. I will confine my comments on his speech to the fact that all the points he has made about multiple jobs and getting self-employed workers involved in auto-enrolment are very much on our radar for the review. I look forward to sharing with him publicly and in our conversations what we have in mind.
The Government are committed to expanding the number of people in the auto-enrolment system. Having said that, I think the right decision was taken when it started to keep it as simple as possible because, in a British way, it was quite a revolution. It was a complete change. At the start it was a compulsory workplace pension, and a lot has been achieved by the National Employment Savings Trust, other pension providers and the Government, with strong political support from all concerned. That does not mean that this is the end of the story. If I may attempt to be a little Churchillian, I would say that it is the end of the beginning, not the beginning of the end—or vice versa; I am never quite sure which order to put it in, but that is what it is. With that in mind, I will confine my comments on the hon. Gentleman’s speech, given your guidance on the scope of the order, Mr Hanson—that also gives me an excuse not to mention the Women Against State Pension Inequality demonstration today.
In response to the hon. Member for Wolverhampton South West, I do have the supporting analysis for the review, in “Review of the automatic enrolment earnings trigger and qualifying earnings band for 2017/18: supporting analysis”. Rather than take the time of the Committee, I will hand it to him, if that is acceptable. It is a comprehensive analysis, and if the hon. Gentleman wishes to take it up further with me, he is welcome to do so.
Rob Marris
I am grateful for the Minister’s generous offer, which I accept. Perhaps he could give the Committee the edited highlights of that evidence.
Richard Harrington
The edited highlights are that there was a full analysis that supports the earnings trigger.
The order increases the qualifying earnings limit in line with national insurance to a £5,876 minimum and an upper earnings limit of £45,000. It maintains the status quo for the system of organising the limits. The earnings trigger, at £10,000, remains at its existing level. I know that I have said this several times, but I would ask hon. Members to be aware that that is because we are doing a review. The Government’s intention is to do the opposite of trying to reduce the number of people who are brought within auto-enrolment.
As for the figure that the hon. Member for Wolverhampton South West mentioned—this marginal amount—there is a calculator that worked out the amount of money, and I intend to write to him on that basis. He will remember that the minimum to start is 1% for the employer and 1% for the employee. If someone had been brought in at £10,000, remembering that £5,000-and-whatever is the minimum, then I can see a number in my head—obviously quite a crude number, because I have not worked out exactly where that could come from—but this is the very beginning. If someone has a small part-time job in their early twenties and has not gone into full-time employment, then I can see that, but of course they are not going to work for 50,000 years. The whole purpose of auto-enrolment is to get people thinking about their savings, to get employers involved, to show the Government’s part with tax relief, and to ensure that, with their state pension and workplace pension, they have enough money for a comfortable retirement.
I believe that I have covered most of the points raised about the order. I thank the Opposition and other hon. Members for their contributions. I do not want to pre-empt the 2017 review. Enough people are involved from the pensions world, the consumer world, the trade union movement and business. A very wide group of people are taking part, not just a few civil servants at the Department for Work and Pensions. I hope that I have set out for the Committee the need for the order and responded to the matters raised, albeit briefly, for reasons I have explained.
Question put and agreed to.
Support for the Bereaved
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
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This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
As ever, it is a pleasure to serve under your chairmanship, Mr Stringer. I thank the right hon. Member for Birkenhead (Frank Field) for securing this debate; it is not the first debate he has instigated that I have answered on behalf of the Government this week, but as usual the comments in his speech, together with those in the Select Committee report, were very serious and well-reasoned. I also thank the other speakers: the hon. Member for Walthamstow (Stella Creasy); the hon. Member for Wirral West (Margaret Greenwood), who spoke for the Opposition; and the hon. Member for North Ayrshire and Arran (Patricia Gibson), who spoke on behalf of the Scottish National party. I would like to make it clear that I listened very carefully to everything that they said, and my remarks may be quite long as a result of that. If they feel that their questions have not been adequately answered, as the right hon. Member for Birkenhead said, I will be able to write to them.
I want to pass on the apologies of the Under-Secretary of State for Welfare Delivery. Ironically, she is not here today because she is attending a funeral. I have attended many meetings on this subject and agreed to step in for this debate. I thought I would make that clear just once; that is the reason why she is not here and I hope that hon. Members, together with the people in the Public Gallery, will accept that.
The Government are very aware—as any of us are as constituency MPs, or just as human beings with our own family and friends—that bereavement is a very difficult time. It is probably one of the toughest experiences we face. Many of these points have been responded to because the same issue was discussed here in Westminster Hall last September. It is perfectly correct that we return once more to this debate, which is about how Government can best support vulnerable people going through bereavement with the practical challenges it can create.
The hon. Member for Walthamstow specifically referred to two of her constituents. I will respond to the other points that she made, but I would certainly be very prepared to meet those two constituents, and I know that I can say on behalf of my hon. Friend the Under-Secretary of State for Welfare Delivery that she, too, would be prepared to meet them. We can arrange that as soon as possible after this meeting if the hon. Lady contacts us, or I will happily contact her office.
All of us have seen the vital support that funeral expenses payments provide; therefore I fully understand, personally as a constituency MP as well as on behalf of the Government, the importance of providing the right support at the right time. Since the debate last September, a lot of work has taken place on funeral payments and support for the bereaved. In responding to hon. Members’ points, I hope also to outline what we have been doing. I will mix responses to their points with a general response on the developments since then.
First, on funeral expenses payments, I wish to put on the record the support that my Department provides for vulnerable people at a difficult time. We make a significant contribution to the costs of a simple, respectful funeral for loved ones of applicants in receipt of qualifying income-related benefits. We meet the full, necessary costs of a burial or cremation, which we know can vary, including the purchase of a grave, necessary burial or cremation fees, the cost of any medical references or the removal of active implanted medical devices for cremations, reasonable costs if a body has to be moved for more than 50 miles and travel costs for the applicant to arrange and attend the funeral. In addition, as has been mentioned, we meet other costs up to a maximum of £700.
In 2015-16, nearly 29,000 funeral expenses payments awards were made—worth more than £40 million—in Great Britain. The average payment has increased by just under 40%—from £1,019 in 2003-04 to £1,410 in 2015-16—reflecting the rise in necessary costs, but not in discretionary costs. That is why in 2012 the Department made interest-free social fund budgeting loans available for funeral costs, in addition to the funeral expenses payments. Last year the average award for all budgeting loans was £418. It is important to emphasise that we made those payments available in 2012, and that they are interest-free. Those loans are crucial for supporting people at a difficult time by removing the need for bereaved families to turn to high-cost lenders and the worry of meeting a funeral director’s bill.
Furthermore, it is worth noting that we provide the most generous support for funeral expenses when we are compared with other European countries—we can still compare ourselves with them for the moment, but that is another debate. Providers of funeral services, including the church, funeral directors, local authorities and crematorium owners, all play a role in ensuring that funerals are accessible to everyone. The Government believe that when a family can take part or all the responsibility for the cost of funeral arrangements, they should. However, there are obviously times when state support is appropriate, and we know that we can do more. Having taken time to set out the facts of what we do, I will turn now to the issues that have been raised during the debate.
On costs and claims, when considering the level of support for other costs, a balance needs to be struck. We do not want the funeral expenses scheme to influence or inflate the prices charged by the funeral industry for a simple funeral, and it must not undermine personal and family responsibility for meeting funeral costs. We have to ensure that the system not only is fair to taxpayers but supports the most vulnerable people. We have been working closely with the funeral industry to discuss how it can improve the transparency of its information about costs and choices. That would help people to make more informed choices and encourage competition within the industry. We remain committed to listening to our stakeholders, as we have been, and to working together to find solutions that are in the interests of the most vulnerable.
For that reason, my hon. Friend the Under-Secretary of State for Welfare Delivery convened a ministerial round table earlier this year, with stakeholders such as the National Association of Funeral Directors, the National Society of Allied and Independent Funeral Directors, representatives from different faith groups and organisations representing bereaved people—in fact, my hon. Friend the Member for Rugby (Mark Pawsey) was also present. A lot of topics that are relevant to issues raised today were covered, including transparency and the costs of funerals in the industry. The Under-Secretary of State asked stakeholders to share news and good practice about how they plan to be more open with their online pricing to support vulnerable claimants, and how they can support the rest of the industry to do the same.
We are carrying out a thorough review of the social fund expenses payments and have created a small working group of stakeholders to work with us to identify where regulation can be amended to help to address and tackle funeral poverty issues. We have also improved information about the scheme so that it is easier for people to understand whether they are eligible. That is available online with the application form, as well as through our dedicated bereavement service telephony line, which hon. Members have mentioned.
We know from research that people prefer to speak to someone on the phone when they have suffered a bereavement, instead of using online tools. We have therefore provided a specialist telephony service with staff who are fully trained to support people sensitively. The service has received positive feedback. It includes an eligibility checker, which has been mentioned—I will come on to that in a moment—and we are taking steps to ensure that claims are processed and that decisions can be made more quickly. Our recent improvements include reviewing all claims on the day that they are received to identify those requiring further evidence; and gathering further evidence by telephoning and texting applicants to speed up the process—[Interruption.]
Richard Harrington
Yes. Thank you, Mr Stringer. I was able to take a deep breath while the right hon. Member for Birkenhead attended to his electronic device.
Let me get back to the rising cost of funerals. We do not believe that the Government should be mandating or promoting a specific form of funeral provision for benefits claimants. Although my Department does not have responsibility for regulating the funeral industry, we are encouraging it to be more open and transparent in the way that I have explained, because people have to make informed decisions.
A number of low-cost alternative options are emerging in the funeral industry, such as direct cremations and municipal funeral arrangements offered by several local authorities. We recognise that those are not geographically widely available yet, and are not relevant to all religious and cultural practices. However, when it is appropriate, the industry should signpost people to direct cremations schemes and other low-cost alternatives so that bereaved people know they have the choice. We believe that improved pre-planning for funerals is just one way of helping individuals to focus on planning for a life event that is not always considered in advance.
Hon. Members, including the hon. Member for Wirral West, discussed the £700 limit. We know that some people need help with short-term needs, such as funeral expenses. Our priority has been to ensure that the scheme meets the full necessary costs of a cremation or burial for such people. The average payments have increased year on year to meet the necessary costs in full. Although we have had to make difficult choices about welfare spending, we have protected the £700 limit for other funeral costs, and we have continued to give people a choice on how they can spend that money on funeral expenses. However, the majority of funeral cost claims exceed the £700 limit, which is why, as I explained, we make interest-free social fund budgeting loans for funeral costs in addition to the funeral expenses payment.
The online eligibility checker was mentioned by the right hon. Member for Birkenhead—I think in his second question—and by other hon. Members. As I have explained, the dedicated bereavement service telephone line already offers an eligibility check and research shows that that has been well received by callers. We believe—I accept that hon. Members may feel differently—that an online checker could cause confusion. User research has identified that individuals would rather speak to an individual during these times—that is based on user research, not on cost. At these very difficult times—at one of the most traumatic times in their lives—they would rather speak to a well-trained human being than deal with a website.
We have been working closely with the bereavement service to ensure that the scripts and messaging are incorporated and updated for funeral expenses payments and to ensure that the staff can adequately offer support to a bereaved person or funeral provider when they access our services.
Margaret Greenwood
As well as talking about funeral costs, will the Minister get on to the continuing support that bereaved people need?
Richard Harrington
I hope it will satisfy the hon. Lady to know that I will. I apologise if I have been going into too much detail about other things, but it is important for hon. Members, and others throughout the country and here today, to understand generally what the Government are doing about these issues, in response to the Select Committee’s report. Please be patient with me; I will do my best to answer her questions. If not, I know that she will question me afterwards, but I hope that that will not be necessary.
The right hon. Member for Birkenhead raised the issue of increasing awareness of the scheme. Information on the eligibility criteria is clearly presented and detailed on the gov.uk website and in the information accompanying a funeral payment application form. The current eligibility criteria ensure that the scheme is administered quickly without additional complex means testing and used solely for funeral expenses payment purposes.
We have received positive feedback from industry representatives on how helpful the bereavement service telephone line is in guiding callers through the application process and their eligibility, and on changes that we are introducing to the application form. We are discussing with third parties such as registrars and funeral directors how we can improve the way in which the Government engage with the bereaved to ensure that information is in the right place and in the right form.
The right hon. Gentleman asked what we were doing to negotiate a reasonable cost for a simple funeral with the funeral industry, as his Committee recommended in its report. We have been engaging with the industry and different lobbies, as I have explained, on how they can make costs more transparent, but we do not believe that the Government should mandate or promote a specific form of funeral provision for benefit claimants. We have encouraged the industry to be more open and transparent about its pricing structure so that individuals can make informed decisions and shop around.
We have engaged with stakeholders to build strong links so that we have the relevant expertise at hand for the first phase of the review, which will visit what parts of the social fund regulations can be amended to help address and tackle funeral poverty issues. We also continue to improve, review and monitor the application process. All that work is being done with the funeral industry and groups that advise bereaved people. In November last year, as I explained, we launched the shorter application form, and we are open to ideas about how we can review the system, in particular the application form for the social fund funeral expenses payment. It has been simplified as much as possible.
On support for child funerals and bereaved parents, I pay tribute to the efforts of the hon. Member for Swansea East (Carolyn Harris), who is not here; I suspect, knowing her, that she is at the debate in the main Chamber. I speak to her regularly, and she put on record her views on the subject in an Adjournment debate, as I recall, on children’s funerals.
Frank Field
Just to put it on the record, she very much wanted to speak, but is in the other debate.
Richard Harrington
I was absolutely certain of it, as the right hon. Gentleman knows.
I confirm that we assign priority to applications received for children’s funerals and aim to process them without delay. We have listened to stakeholders’ concerns about the need to support bereaved parents of children, and we are currently considering how we can introduce a separate application form and system to help simplify the process in those tragic circumstances. We are keen to know how else to support individuals who require support for children’s funerals. The view of most funeral industry representatives at the round table that I mentioned was that the vast majority of funeral directors already waive fees or offer significant discounts for child funerals, although there are no industry-wide arrangements and there is no guidance in place. The National Association of Funeral Directors offered to do a survey of its members on current practice.
Moving on to bereavement support payments, I will respond to the points made by the right hon. Gentleman and others. As has been stated, both Houses of Parliament have approved, under the affirmative procedure, the Bereavement Support Payment Regulations 2017. The new bereavement support payment, which is due to be launched in April 2017, will replace three current bereavement benefits: the bereavement payment, bereavement allowance and widowed parent’s allowance.
Losing a spouse or civil partner is obviously tragic, and bereavement benefits provide vital support during this distressing time. Previous reforms have tended to be limited and made in response to specific pressures. No one had really considered how bereavement support fitted in with wider changes to the benefits system, and indeed to the social landscape as a whole. The aim is to provide targeted financial support at the time when it is needed most, without affecting access to additional forms of support that are available through other parts of the welfare system.
Stella Creasy
The Minister just said that the reforms are designed to provide targeted help when it is needed most. On what evidence has the concept of “most” been based, in his calculations? What does he define as a time when less help might be needed, as opposed to the most help? It would be helpful to understand the Government’s thinking.
Richard Harrington
The hon. Lady makes a good point. I used the word “most” to refer to the most critical short-term time, which is what I was discussing, but I am prepared to accept her point, without getting into a competition about when “most” is most. It is all the time, and I am happy to say that, but that is not the context that I was referring to.
I hope the hon. Lady will agree that the old system could be unfair and complex, and could act as a trap preventing people from readjusting. Reform is essential to simplify and modernise the system. The history of bereavement benefits is rooted in the Widows’, Orphans’ and Old Age Contributory Pensions Act 1925. The way that people thought in those days was that most women were wholly dependent on their husband’s income. If a woman was widowed, her sole source of income would disappear completely, so it was considered necessary to provide a replacement income for her to survive.
Today, women as well as men actively participate in the workforce, and many households now benefit from dual careers and dual incomes. That is why we are modernising bereavement support into a simple, uniform and easy-to-understand benefit that better reflects society. We listened to the recommendation of the Work and Pensions Committee that there was merit in considering the length of the new bereavement support payment. For that reason, the bereavement support payment is now payable over 18 months.
Patricia Gibson
The Government have said that this is not about saving money but about, as the Minister has said, rationalising the system, bringing it into the modern era and so on. However, the Work and Pensions Committee told us that the changes to bereavement support payments will save £100 million. If this is not about saving money, will that £100 million be reinvested in helping the 75% of people who will lose out under the new measures?
Richard Harrington
If the hon. Lady will be patient with me a little longer, I will mention the financial point that she has made. I am sure that she will intervene to castigate me if I do not.
The new bereavement support payment restores fairness to the system and focuses support during the 18-month period after a loved one dies, when people need it the most. I accept the view of the hon. Member for Walthamstow that “most” can mean a lot of things. If I said “when people need it” without “the most”, it would still mean the same thing. People need it in those 18 months. The support is not taxed and is subject to a disregard for income-related benefits. The idea is, hopefully, to help those on the lowest incomes. Those who are least well off will gain the most, as for the first time they will be able to receive payments of bereavement benefit in full alongside any other benefit entitlements.
In her case studies, the hon. Member for Walthamstow mentioned the duration of payment and interactions with universal credit. We do not believe that the period of payment could or should be equivalent to the period of grief following spousal bereavement. As I know from the experience of many people known to me, grief can go on for one’s whole life. The payment is not designed for that; it is designed to support people with the additional costs associated with bereavement, rather than providing an income replacement. That is probably the contradiction with the points that she made.
Stella Creasy
I thank the Minister for trying to clarify the Government’s thinking, but as he goes along, he is making rather a different case. He says that the changes needed to happen because women are now entering the workforce. The old system was taxed, so if he is concerned that women might have additional income, continuing the old system might deal with that challenge better.
The Minister talks as well about people needing it most, but surely he recognises that although the loss of a partner is emotionally difficult, the practical financial concerns are paramount here. Does he recognise that the picture that he is painting of the issues is slightly askew from the reality of what the issues are for these women?
Richard Harrington
Obviously I do not agree with the hon. Lady’s subjective point that I do not recognise the reality of the situation. We are not trying to replicate the period of grief with this benefit. As I have said, it is designed to support people with the additional cost associated with bereavement, rather than providing an income replacement. Her view, from what she has said, is that the support should be an alternative to the other income support systems.
Stella Creasy
Let me be absolutely clear: the support is predicated on the contributions that the partner will have paid into the national insurance system, just as they might get a pension from their partner. We are talking about fairness to the children so that they benefit from the contributions that their father made and about the impact on the family’s income. Actually, it is not about replacing income support; it is about the fact that the father has paid in a contribution that should be recognised to the children’s benefit.
Richard Harrington
What the hon. Lady talks about is not really what I am talking about, but I accept what she has said. I was actually talking about the bereavement support payment, which is a lump sum payment.
We believe that income-based benefits are more suited to providing longer-term assistance with everyday living costs. Unlike bereavement allowance and widowed parent’s allowance, bereavement support payment will be paid in addition to any other benefits the recipient is entitled to, thus ensuring that the least well off receive the extra cash in their pocket to help with those extra financial strains brought about by the unexpected loss of a spouse or civil partner of working age. Long-term ongoing income-related support will be provided through universal credit, which better targets support to those with the greatest need.
The regulations make no changes to conditionality, which has been mentioned. Like the bereavement benefits it replaces, the bereavement support payment sets no work-related conditions. Any obligation to participate in any work-related activity will come from claiming other benefits. That said, it is well known that long periods out of work can have a negative effect on an individual’s prospects of future employment. That is why the Government think it is important that people are encouraged to maintain, as much as they can, a link with the labour market.
Recipients of bereavement support payment who also receive universal credit will therefore be able to access Jobcentre Plus support on a voluntary basis from three months after bereavement. They will then not be subject to conditionality for a further three months. Those exemptions from conditionality will also apply after the death of a child or partner, even where there is no entitlement to the bereavement support payment. At the end of the six months, advisers will use their discretion to ensure individuals’ capability and requirements are taken into account. That is the best way of ensuring that the support we give is tailored to the individual.
The right hon. Member for Birkenhead and others mentioned the extension of the bereavement support payment to cohabitees. That was discussed in detail during the passage of the Pensions Act 2014. Marriage and civil partnerships are legal arrangements that are associated with certain rights, including inheritance and recognition in the tax system. Extending eligibility to cohabitees would not only increase spend, but be complex to administer. Having to prove cohabitation could be a lengthy, complex process, which could cause distress at a time of bereavement.
Many critics have suggested that it is unfair that those who choose not to formalise their relationship are treated as a couple for income-related benefits, but not for contributory benefits. Income-related benefits serve a different purpose, however: they are for the ongoing day-to-day needs of a household, irrespective of whether the relationship is formal. When assessing entitlement to income-related benefit payments, the state rightly assumes that couples, whatever the legal status of their relationship, have joint outgoings and share resources such as earnings or other income.
The position with bereavement benefits is different, because they are contributory. The founding principle of the contributory benefit system is that all rights to inheritable benefits derive from another person’s contributions. That is based on the concept of legal marriage, which has extended to civil partnership in recent times. Unmarried or non-civil partnership couples will, of course, have access to a full range of income-related benefits and will benefit from the removal of conditionality requirements in exactly the same way as those in a legal marriage or civil partnership.
Richard Harrington
I am not trying to suppress the hon. Lady’s comments, but I was about to explain about widowed parents under the new system, which, if I may boldly suggest it, was probably what she was going to ask me about.
Stella Creasy
I was simply going to ask whether the Minister will clarify whether he considers children to be a joint outgoing. If he does, the contributions that a partner would make to a household would also be eligible. The idea that if people are not married, their relationship to those joint outgoings somehow stops at their death seems rather misplaced, does it not? I have certainly heard that children are expensive.
Richard Harrington
I can personally verify the latter part of the hon. Lady’s comments on the expense.
The new bereavement support payment restores fairness to the system and focuses support just on that 18-month period after a loved one dies, when it is most needed. It is not taxed and will be subject to a disregard for income-related benefits, helping those on the lowest incomes the most. Widowed parents will no longer lose their benefits if they decide to remarry or repartner. We do not believe that the period of payment could or should be equivalent to the recovery period following spousal bereavement. I am sure most people would agree that that is a totally different amount of time.
Unlike with the widowed parent’s allowance, claimants of the bereavement support payment will be entitled to receive all the other benefits at the same time. Disregarding bereavement support payment in the calculation of other benefits will ensure that the immediate additional costs of bereavement are met. Those requiring support will be able to obtain it from other areas of the welfare system, and I cannot stress that enough. Its purpose is better placed to provide longer-term, means-tested financial assistance.
The right hon. Member for Birkenhead, the hon. Member for Walthamstow and other Members made a reasonably cynical, but well-made point about the changes to the bereavement benefit. They basically said that it was just an austerity measure, delivering savings of £100 million to the Treasury after two years. Over the first two years of the reform, we will actually spend an additional £45 million, but any savings, like in anything else in the public finances, will be for future Governments to reinvest as they choose. I therefore cannot undertake, as I have been asked, to ensure that savings are reinvested in this field.
It is important to emphasise for the record that nobody in receipt of the current bereavement benefit stands to lose out as a result of the reforms. Recipients of the current benefit will continue to receive it for the natural lifetime of their award. Furthermore, households with dependent children will receive higher payments in recognition of that fact. Analysis shows that more people stand to gain than to lose from the changes. That is particularly so for the least well off, because—I have made this point several times—bereavement support will be paid on top of any income-related benefits that the household receives.
The Government have been asked here and elsewhere to extend the duration to three years and make the BSP cost-neutral. If we did that, we would have to fund it by reducing other elements of the payments. There seems to be little rationale for reducing the monthly payments for parents to make extending the duration cost-neutral. It would reduce payments to a token amount, which would not meet the intention of dealing with the immediate costs relating to bereavement.
With the introduction of the bereavement support payment, short-term financial support will be provided based on six months of national insurance contributions. The amount and duration of the award will be clear from the outset, allowing people time to plan ahead. Those requiring further support will be able to obtain it from other areas of the welfare system that are better placed to provide longer-term, means-tested financial assistance.
The hon. Member for North Ayrshire and Arran made a point on uprating. Any decisions on future changes will be taken as part of the annual process in the context of the wider public finances. I cannot say much more on that, other than that section 150 of the Social Security Administration Act 1992 provides for the rate of BSP to be reviewed annually. The Government committed to review the bereavement support payment reform in the impact assessment of 2013, but we cannot do that until sufficient evidence is available to assess all aspects of the policy, including its effectiveness and the impact on different groups of claimants.
The hon. Lady also made a point about the consequences for children of bereavement support payments. She said that, as a result of the shorter duration of payments, 75% of new claimants with children will be worse off. No one in receipt of the current bereavement benefits stands to lose out as a result of these reforms. As I said, recipients of the current benefits will continue to receive them for the natural lifetime of their award. Furthermore, for those households where there are dependent children, a higher level of payments will be made in recognition of that fact.
In conclusion, let me reassure hon. Members that the Government are absolutely committed to supporting the bereaved and ensuring that individuals have the opportunity to access the funeral expenses payment scheme. Our priorities remain to improve the funeral expenses scheme, to raise awareness of the scheme and to ensure that we are doing what we can to offer a provision of support for vulnerable claimants.
National Employment Savings Trust
Lord Harrington of Watford Excerpts(7 years, 8 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
From 1 April 2017, changes to the National Employment Savings Trust Order 2010 and to the National Employment Savings Trust (NEST) rules will allow individual and bulk transfers into and out of the scheme in prescribed circumstances. These changes will help people who wish to consolidate their savings with NEST or with other pension providers, which is critical to reducing costs in pension schemes and avoiding large numbers of small scattered pots, often forgotten about by savers and hard to trace.
I can now confirm the charge structure that will relate to such transfers. Under the determination made by the previous Government, the trustee of NEST makes an annual charge on funds under management. This has been set by the trustee at 0.3%. In addition, to help cover the set up costs, the trustee makes a charge on contributions into the scheme from both employers and employees. This has been set by the trustee at 1.8%.
Introducing a new type of charge for transfers in would add complexity for members and be inconsistent with the Government’s policy on charges. Therefore the existing contribution charge and annual management charge will apply to funds transferred into NEST. The trustee will set the level of these charges as they apply to transferred funds.
Levying a 1.8% contribution charge in these circumstances would be punitive for members and would discourage pot consolidation. Charges on transfers in are the exception in modern pension schemes and our policy is to discourage such charges. Therefore, I expect the contribution charge that will apply to transfers to be less than 1.8% and place no lower bounds on its level, which is to be set by the trustee with due regard to the impact on members and scheme finances. The trustee will also be able to set a minimum transfer value.
In the case of bulk transfers, the trustee will also have the option of recovering the costs of administering the transfer from the employer.
The Government aim to achieve a balance between delivering good value to NEST’s members, managing impacts on the wider pensions industry and ensuring affordability for the taxpayer. I have been assured by the trustee that, in setting the level of the charges to apply to transfers, it will take into account its target market and public service obligations and am putting in place arrangements to enable me to keep this under review.
[HCWS511]
Intergenerational Fairness
Lord Harrington of Watford ExcerptsTuesday 28th February 2017
(7 years, 8 months ago)
Commons ChamberRead Full debate Supply and Appropriation (Anticipation and Adjustments) Act 2017 View all Supply and Appropriation (Anticipation and Adjustments) Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
Having learned a word from you earlier today, Mr Speaker, I can say that hope we have all learned from the sagaciousness of the right hon. Member for Birkenhead (Frank Field), the Chairman of the Select Committee, who started the debate. I am indebted to you, Mr Speaker. At least I have got that on the record—and many other words I have learned from you.
I seriously thank all Members, on both sides of the House, for their contributions, particularly the members of the Work and Pension Committee who spoke. I appreciate the comments that have been made about the Pensions Regulator securing the settlement with Philip Green. I am very pleased about that. It is good for scheme members, and it will bring peace of mind to the 19,000 BHS pensioners who have endured uncertainty following the company’s collapse. I commend both Select Committees for the work they have done on that issue. I also commend the Pensions Regulator and its staff, who have worked very hard and done everything we could have expected of them.
This has been an informative and timely debate. Recent evidence shows that pensioner poverty is at a near record low, which is a good thing for a Pensions Minister to be able to say. We have seen a dramatic fall in the percentage of pensioners living in poverty from 40% in the early 1970s to 14% in 2014-15, but I hope that I never give the impression of complacency. Poverty is poverty, and there are still far too many pensioners living in poverty.
Intergenerational fairness is an easy thing to say. My hon. Friend the Member for Peterborough (Mr Jackson) talked about his grandparents, and I also come from a generation whose parents knew poverty. They knew unemployment, they knew the war and they knew poverty—[Interruption.] I beg your pardon, Mr Speaker; I was trying to be sagacious in my comments. I was about to mention my mother, who has a photograph of you on her mantelpiece.
We were brought up hearing people say, “You don’t know you’re born, you lot. You’re so lucky.” And we were a lucky generation. One aspect of the luckiness of my generation, as was mentioned by many Members, including the shadow Secretary of State, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), is that we were often the first generation to go to university. I want to make it clear that the answer to intergenerational fairness is not to make pensioners poorer; it is to concentrate on building the economy, building extra houses, and having better quality education and apprenticeships. All those things have been described eloquently by many Members, in most cases in what the Americans would call a bipartisan manner. I am pleased to be part of that debate.
The labour market is the strongest that it has been for years. The employment rate is at a record high, and in the past year we have seen nearly 300,000 more disabled people, over 200,000 more women and over 150,000 more black and minority ethnic people in work, so the signs are pretty good. Rightly, there is cross-party consensus that achieving lower levels of pensioner poverty is a worthy objective. Who would say that it was not? I recognise the valuable work of the Work and Pensions Committee in promoting such issues. It almost goes without saying that we want to ensure that pensioners are treated with the dignity and respect that they deserve in retirement. Anyone in the House, and in the country, would say that.
The right hon. Member for Birkenhead acknowledged that pensioner poverty had been hugely reduced over the past decade, but he and his Committee are right to look at the long-term alternatives. He said that budgetary matters are important. We cannot talk about the triple lock or any other system without considering the amount of public expenditure involved. I am sure everyone would agree that the Government’s commitment to the triple lock is an invaluable element in addressing the issue of pensioners living on a low income. As a result of the triple lock, the value of the full basic state pension as a proportion of average earnings is at its highest since the 1980s. Since 2010, the triple lock has given current pensioners, more than 1 million of whom rely solely on the state for their income, up to £570 a year more than if their pension were just uprated by earnings. As I and others have stated, that was why we introduced the triple lock in 2011, and it is why we have committed to continuing it over this Parliament. It has protected the income of millions of people.
Richard Harrington
I am sorry, but I do not have time. Normally I would be happy to give way.
As my hon. Friend the Member for Weston-super-Mare (John Penrose) eloquently pointed out, we have to be careful about creating a burden for future generations by spending money today. He made an interesting, eloquent speech, and I hope to discuss his moral prism with him on many other occasions, within the Chamber and without. Achieving for the pensioners of today does not preclude us from ensuring a good deal for the pensioners of tomorrow. The Government are determined to build a country that works for everyone. The coalition Government took some difficult decisions to put the welfare system on a sustainable footing while still protecting the most vulnerable. It is important to remember that, since 2010, the Government have focused on reducing the deficit and getting public spending under control in order to protect future generations from unpayable public debt. It is important that that is recognised, and it fits in with what my hon. and right hon. Friends have been saying.
There are clear signs that we are prioritising the sustainability of this country’s pension provision. In the limited time available, the best example that I can provide, which was mentioned by the hon. Member for Oldham East and Saddleworth, is the success of auto-enrolment, which the Department is currently reviewing. I am pleased that more than 7 million people have come under auto-enrolment which, I should say—the hon. Lady will jump up to say it otherwise—was introduced by a Labour Government. It was started through a cross-party arrangement and it has received cross-party support, but the hon. Lady is right to question the Government about the review, which we have been open about, because many categories of people have not been included. As for intergenerational fairness, the early success of auto-enrolment is a good sign for people who will be retiring in many years to come. They will be able to calculate their state pension plus their auto-enrolment workplace pension and get a clear idea of what they need to retire on. I am also pleased to say that the level of opting out is low at the moment, but that is not a cause for complacency.
While several hon. Members made this point, I want to highlight what my hon. Friend the Member for North Swindon (Justin Tomlinson) said about apprenticeships and UTCs, which are crucial for the future. As the Prime Minister’s apprenticeship adviser when the pledge for 3 million apprenticeships was made, I am pleased to say that the Government are on course to meet that target. We have all seen in our constituencies how important that is. Prosperity often comes from skills, but skills come from not only university but the alternatives to university. I am pleased that that is becoming something real, not just a political promise.
The Government’s approach to intergenerational fairness is based on ensuring that there is economic prosperity and security for working people at every stage of their life, including in retirement. The hon. Member for Motherwell and Wishaw (Marion Fellows), who I respectfully say is from my generation—[Interruption.] Okay, I know that I look a lot older than her, but I think that we are from roughly the same generation. She eloquently made the point that our generation has not had a one-way bet. I, too, remember when interest rates shot up—I was also driving and thinking about my mortgage—so I understand her point perfectly. I agree that we cannot say, “It is all right for us lot but it is not good for the next lot,” because life goes up and down. The Government have to take all that into consideration.
The Government are committed to improving productivity and innovation, which we all agree is to the benefit of everyone in society. We are acting to boost productivity, which is crucial to raising living standards, by investing in infrastructure, supporting job creation and reforming the markets.
I conclude by emphasising that Governments have to look at the whole picture. State pensioners and private pensioners are part of that picture, but achieving real intergenerational fairness for everybody—that is what we all want and it is why most of us stood for election—involves ensuring that people have long working lives, get prosperity from working, enjoy their work, and save for their future. It is for the Government to guide them, from the day they start work until the day they retire, on saving for their prosperity in the future.
Question deferred (Standing Order No. 54).