Housing: Underoccupancy Charge

Lord Paddick Excerpts

Tuesday 14th January 2014 Lords Chamber

[Lord Freud]

My Lords, I can tell the noble Lord that the numbers involved in this anomaly are small and the amounts are modest. We have put guidance out to local authorities and we intend to regularise the matter through regulations in March.

[Lord Paddick (LD)]

My Lords, the legislation agreed by this House includes the requirement for a full review of the underoccupancy charge. Would my noble friend the Minister tell the House what progress has been made in putting this review in place, and will he confirm that this important process will include not only the impact of the policy but the methods of implementation?

[Lord Freud]

My Lords, we have an elaborate review, about which I have given full information to this House in the past, that is coming out in two stages. We have the interim report coming out later this year, and we have the final report coming out in 2015.

Pensions Bill

Lord Paddick Excerpts

Monday 16th December 2013 Grand Committee

[Baroness Sherlock]

My Lords, I shall speak to Amendments 4A and 6, which are in my name and that of my noble friend Lord Browne of Ladyton. Amendment 6 is a probing amendment that would require the Government to conduct a review to determine whether all the women born on or after 6 April 1951 should be included in the scope of the new state pension arrangements. Amendment 4A—I apologise for its late tabling—would require a detailed assessment of the impact on those women who benefit as a result of derived entitlements.

We on these Benches will use the device of asking for reviews more than once in this Committee. I have said already that we are very supportive of the aims of the Bill and regard its direction of travel as continuing the work that we began in government. Labour understands the challenges of reform on this scale and the potential fiscal implications of some of the changes that many people will want to see to the system. However, we need to understand precisely what the implications will be and what the impact of these changes will be on different categories of people who will be affected by them. I have been very grateful to officials for doing their best to provide us with information, and I thank the Minister for giving us access to them and to it. However, it has still not always proved possible or straightforward to understand the impact of these changes on particular categories of people, and this cohort of women is a prime example.

It is our role in this House during Committee to try to get to the bottom of the detail of the impact of these Bills, and I hope very much that this review would enable the Government to do that. However, maybe the Minister can give us the information that would make that unnecessary. Despite the goal of a simpler system, there is still a lot of complexity in the system, as we have already heard—often, inevitably, in the transitional provisions. However, we will need to understand what the impact will be.

I have received a great deal of correspondence on this issue, as I am sure other noble Lords have, from individual campaigners and organisations concerned about the position of women born between April 1951 and April 1953, and my noble friend Lady Hollis has set out a range of concerns about their position. The headline concern that has been raised most often with me posits the position of a pair of male and female twins, born on the same date in that window, who are treated differently. The man will get the new single-tier pension and the woman will not, even if both have worked for 35 years or more or even if both of them are still working, with the woman having deferred her pension. My noble friend made the important point that unemployed men are treated effectively as if they are retired and get the equivalent to the amount that the woman would receive in pension. Those women are caught in the equalisation of the pension age. They say that they do not object to the equalisation but they feel that they have lost out in comparison with other women because, unlike women born before April 1951, they could not retire at 60 on a full pension. Those born after April 1953 get the full STP at the age of 63—that is, up to one year and 10 months earlier than men born after April 1953.

At Second Reading my noble friend Lady Donaghy gave a moving account of the life courses of many women of that age and the extent to which the way they are treated by society and the state has changed so markedly over their lifetimes; they really are a transitional generation. Whatever the Government finally decide, it is important that Parliament and the Government listen to their concerns before making a decision that they cannot be included.

We acknowledge that a line must be drawn somewhere but there are some questions to which I have not yet had satisfactory answers. First, as my noble friend Lady Hollis noted, there is the position of men born between 1951 and 1953 who are unemployed and get treated as if they were pensioners. Currently, a man in that situation who cannot claim the state pension, where a woman of the same age would, can get pension credit. Will the Minister confirm that that is the case? If so, the question has been raised with me as to whether these women have a claim in law on equality grounds and, if so, what that would mean. It might be helpful if the Minister could tell us whether the Government have sought legal advice on this matter and, if so, have they been assured that their position is safe? I assume that they were or the Minister would not have felt able to sign the habitual statement at the start of the process, but it would be helpful to clarify that.

The second big issue was the impact on this particular cohort of women. From having read the proceedings in another place, I think that the Government’s case is this: there are always cliff edges; there are always winners and losers and these are just the unlucky ones; these women will already be pensioners and some will have been able to draw their pension before 2016; they can always exercise the right to defer drawing down their pension and get a 10% uplift each year, which would effectively bring them up to the STP level by 2016; and only 70,000 of those 700,000 women born between 1951 and 1953 will be worse off, and the median loss will be only £6 a week.

The response of the campaigners to that case is this: some people will lose more than £6 a week, but even £6 a week is a lot of money, especially for 25 years. They are getting their pension earlier, but over their lifetime they will be disadvantaged. I would be grateful if the Minister could confirm that that was the case and, if so, when the break-even point comes, since they could be expected to live for a further 10 to 15 years and in some cases many more, we hope.

Thirdly, the campaigners say that most women spend most of their working lives expecting to retire at 60, so this is a shock to them. Finally, they point out that not many people can afford to defer taking their pensions. The figures that were supplied to us by the department suggest that only 0.9 million people in Great Britain get an increment as a result of deferral, as against 10.8 million who do not. I think that the figure in total was 1.2 million. If that is the case, inevitably it is a minority activity. Effectively, therefore, the right to defer your retirement date is a bit like the right to shop in Harrods: we can all do it but we cannot all afford to do it, so I am not sure that that totally answers the question.

That leaves us with some unanswered questions which I invite the Minister to address. First, there seems to be agreement that 70,000 women from this cohort will lose out. I do not yet understand the Government’s case for saying that they are so confident that the other 630,000 will be better off remaining in the current arrangements. The Government claimed in the other place that most women would be better off under STP. In the Committee there, the Pensions Minister said that, in the first few years, 700,000 women would be better off on STP by an average £9 a week. The impact assessment says that, as a result of the STP valuation, around 650,000 women who reach state pension age in the first 10 years after implementation will get an average £8 more in state pension in 2013-14 earnings terms.

The question then is this: how is the cohort of women born from 1953 to 1960, to whom those figures refer, so different from those born from 1951 to 1953? In other words, if the people who just get in will be better off in the new system, why would the people who just miss out be worse off? I hope that the Minister can explain to me the reason for that.

I want to drill down into this. The only reasons that I can think of come in the form of questions. First, the Government say that 30,000 people will lose from the derived entitlements post 2016. Can the Minister tell us how many of this cohort—that is those 1951 to 1953 women—would have derived entitlements? If not, perhaps he would smile upon our Amendment 4A. Secondly, some divorced couples with pension-splitting arrangements might be worse off under STP. Does the Minister know how many of those are within that 630,000? Thirdly, do most of those women have 30 years’ national insurance credits? Is that a factor? How many of them would have enough to get access to a full single-tier pension? Fourthly, how many of those women are better off as a result of their getting pension savings credit? What might happen in the future given the direction of travel on that?

My final question is about the costings. In Committee in another place, the Minister suggested that the costs for bringing this group into the system would be an initial £150 million a year, peaking at £300 million, and cumulatively costing about £4 billion. I am not an economist so I am not disputing the figures, but I do not understand them. If only 70,000 women are worse off and by a mean £6 a week, I make that—admittedly, using my calculator—£21 million a year. Even if they live for 25 years after retirement, I cannot get that above half a billion pounds. I am not suggesting that that is a small sum, nor offering to spend it; I am just trying to understand why I am so far out from the costings given by the Minister in the other place. I apologise for asking so many questions, but this is a complicated matter. Before we make any decisions and before the Government are to proceed on this, we need to understand the implications.

[Lord Paddick (LD)]

My Lords, as the noble Baroness, Lady Sherlock, said previously, there is great confusion among the public about the consequences of the Bill. I have to confess that that includes me. I, too, am feeling my way here rather than making authoritative statements.

The noble Baroness, Lady Hollis of Heigham, spoke about the men between 60 and 65 who are treated as pensioners because they are unemployed. I presume that that is a small proportion of men in that cohort and that the overwhelming majority have to wait until 65 to receive their pension, as opposed to those men who are unemployed during that period. Therefore, the statement that all men are treated the same as women applies only if they become unemployed, if I understand the situation correctly.

Pensions Bill

Lord Paddick Excerpts

Tuesday 3rd December 2013 Lords Chamber

[Lord Paddick (LD)]

My Lords, perhaps I may start by declaring a couple of interests. I am already in receipt of a police pension and I thought that I would be in receipt of the state pension in 10 years’ time until I received a letter from the DWP telling me that it will now be 11 years. Some noble Lords may be intrigued as to why, as a former police officer, I am contributing to this debate. My main concerns are about the reforms to welfare that this Government have introduced. However, I am slightly less concerned about this Bill. Noble Lords also may wonder why I am contributing when there has been such a big build-up in terms of how interesting this subject is. I have to say that the contribution of the noble Lord, Lord Hutton of Furness, was fascinating more than interesting. I congratulate my noble friend Lord Balfe on his maiden speech, which may sound a bit cheeky coming from someone who made his only five minutes ago, but his wealth of experience will be very valuable in this House.

I support this Bill and pay tribute, as others have done, to my honourable friend the Pensions Minister, Steve Webb, and his team. This is a difficult subject for any government to tackle. It is to his and his team’s credit that they have taken it on. As the noble Baroness, Lady Sherlock, has said, there are three tests; namely, that pensions must be fair, sustainable and provide a decent standard of living. I believe that that is what this Bill does. Of course, it is up to your Lordships to test that during our debates at this stage, in Committee and on Report.

When the state pension was introduced in 1926, only half of those who reached the age of 15 were expected to live to the age of 65. On average, people would spend just over 11 years collecting their state pension. In 2013, 93% of 15 year-olds are expected to live to 65 and 32%, almost one-third, have a chance of reaching 100. Clearly, in terms of sustainability, things need to change. The level at which the new single-tier state pension is set appears to be reasonable, as has been said by the Minister, and is above the current state pension means test. It allows people to plan for their future on the basis of understanding what, at least in today’s money, they are likely to expect when they reach pensionable age.

The automatic enrolment of workers in pension schemes requires safeguards. This Government appear to have worked hard to ensure that those safeguards, including, as has been said, the very welcome capping of fees, are in place. I will talk about the “pot follows member” issue at the end of my remarks. The noble Baronesses, Lady Donaghy and Lady Sherlock, expressed concern about women born between 1951 and 1953 who will not be eligible for the single-tier pension whereas men of the same age will be. My understanding is that these women need to make only 30 years of national insurance contributions, as opposed to 35 years for their male colleagues. In addition, those women will be able to draw their state pension earlier than men, at some time between the age of 61 and 63. Men in the same age group will not be able to draw their pension until they are somewhere between the age of 63 and 68. Clearly, that is not a straightforward issue. Swings and roundabouts are involved.

As someone who has more than 30 but less than 35 years of qualifying national insurance contributions, I also might be concerned that I do not appear to qualify for a single-tier pension, which is currently set to be £144. However, I am reassured that, if the new system gives me more than the current £110, I will get that amount. If I would have received more under the old system, I will receive that amount. In short, while others may be better off than me under the new scheme, at least I will not be worse off. I ask whether these changes are to be brought about because of the need to be sustainable.

Clause 25 in Part 2 would increase the age at which the state pension becomes payable from 66 to 67 between 2026 and 2028 instead of between 2034 and 2036, as set out in the Pensions Act 2007. That is eight years earlier than previously planned but it still gives a lead time of 13 years, which will enable people to make provision for it. Surely, this makes sense when one takes into account the fact that, at the moment, life expectancy, I am reliably told, increases by four hours for men and six hours for women every day.

Clause 26 introduces a review of the state pension age, taking into account life expectancy and other relevant factors, every five years or, allowing for some leeway, every six years as stated in the legislation. These are difficult but necessary decisions from which previous Governments have shied away. This legislation ensures that future Governments will not be able to duck that responsibility. The first report would be in 2017. The Secretary of State will have to commission reports from the Government Actuary’s Department on life expectancy and from an independent, appointed panel on other factors to be specified by the Secretary of State. This Government have indicated that the panel will be similar in nature to the Hutton inquiry. It seems eminently sensible that not only life expectancy but other factors that may arise or change over the years are considered by an independent panel, provided there is sufficient lead time to enable those affected by such changes to plan for their retirement.

As noble Lords have said, differences in life expectancy in different parts of the country or among different socioeconomic groups need to be addressed. Surely those matters should be addressed by other means to try to equalise life expectancy in these different areas, rather than trying to equalise through pensions legislation. Most importantly, these reforms will ensure that the state pension remains available not just for my nephews and nieces but for their children as well.

On whether “pot follows member” would be the right system, my understanding is that Australia, a country that is held up as an example of good practice as regards pensions, now considers that it should have introduced such a system. The suggestion that this is the way that the country will go is encouraging. As regards ensuring that there are caps on fees charged by pensions providers, it is hoped that the minimum standards to be applied should ensure that if pot does follow member to a new employer, the new scheme will be as good as the one from which the money is being moved. Clearly, employees will have to consider into what pension scheme their money would be moved when they consider all other aspects of the remuneration package provided by the new employer.