Working Tax Credit and Universal Credit: Two-Child Limit

Margaret Ferrier Excerpts

Thursday 21st April 2022 Westminster Hall

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

An exception to the two-child limit is where the child was conceived in non-consensual circumstances, but to be eligible for this exception the parent must be able to point to either a conviction or a criminal injuries compensation claim. Does the hon. Member agree that as rape conviction rates are so low, because the bar for evidence is so high, this requirement further victimises claimants?

[Alison Thewliss]

That is absolutely correct. I will go on to talk about some of the exemptions to the policy and how ludicrous they are, but for a crime such as rape to have some place within Government policy on benefits is quite abhorrent.

The first difficulty with this policy is that it gives an arbitrary cut-off date, resulting in two classes of families: those with children born prior to 6 April 2017 and those with children born after that. For the arbitrary quirk of fate of bringing a baby into this world a minute after midnight, a family will find itself £2,935 worse off per year. I give some credit to the former Secretary of State, Amber Rudd, for not making the policy retrospective, as was originally intended. However, having recognised the inherent unfairness of the policy, she ought to have abolished it altogether.

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[Beth Winter (Cynon Valley) (Lab)]

I very much welcome the time allocated to this debate today. It is vital we have this discussion, because the two-child-limit policy is yet another legacy of the low-pay, low-income experience that is the stamp of the Conservative Government. We have already discussed in recent weeks in this building the impact of the real-terms cuts in social security benefits and the minimum wage, and what we all anticipate will be a real-terms public sector pay cut. The debate today has reflected on the first of those: the appalling offer of a 3% increase in social security while inflation is increasing at 7% and could well go up to 10%. That is a real-terms cut in people’s incomes. How people will survive I have no idea.

Some households do not even receive a 3% rise because, under the two-child limit, parents are not entitled to any extra support through universal credit or child tax credit to help with raising a third or subsequent child born after 6 April 2017.

[Margaret Ferrier]

Does the hon. Lady agree that following the Government’s decision to cut universal credit payments, with inflation rates rising astronomically and a real cost of living crisis, a decision to keep the two-child limit is actively pushing children below the poverty line, which will undoubtedly impact on the UK’s levels of social mobility?

[Beth Winter]

I totally agree. Action needs to be taken on all those policies, including reinstating the £20 universal credit uplift and extending it to those on legacy benefits. We need a whole raft of policies to prevent, reduce and tackle the extreme levels of child poverty that currently exist in this country.

I refer briefly to the Child Poverty Action Group and Church of England report commissioned for the fifth anniversary of the two-child-limit policy. It is very clear in saying that the two-child limit breaks the historic link between need and entitlement. The benefit should be an entitlement, but that link, which was the founding principle of our social security system, has been broken. The report is clear that our social security system should support families and give children the best start in life, regardless of how many siblings they have. They are our future and we should invest in our future generations. The report concluded that the Government must remove the two-child limit to allow all children to thrive.

April’s below-inflation benefits rise means that affected families with three children face a further £938 a year shortfall in benefits to cover the basic costs of raising them, on top of the pre-existing £6,205 shortfall from 2021, with larger families facing an even bigger hole in their income. That is absolutely appalling and devastating for millions of families throughout the UK.

The two-child limit restricts child allowances in universal credit and tax credits worth £2,953 per year to the first two children in a family unless the children were born before 6 April 2017, when the policy came into force. As the hon. Member for Glasgow Central (Alison Thewliss) has already outlined, the disparities, inconsistencies and discriminatory practices in terms of who is and is not entitled are completely unfair.

Unless this two-child limit is abolished, the number of children affected will reach 3 million, as more are born under the policy. We currently have 4.3 million children across the UK living in relative poverty. That equates to around nine in every 30 children in a UK classroom.

As the two-child limit is the biggest driver of this rising level of child poverty, CPAG has estimated that it will push another 300,000 children into poverty, and 1 million more into deeper poverty, by 2023-24. By 2026-27, over 50% of children in families with more than two children will be living in poverty—half of the population in poverty.

We already knew in 2019, from the Work and Pensions Select Committee report on the two-child limit, of concerns that it breached not only the Government’s wider responsibility and international commitments to equality but human rights, including the European convention on human rights and the United Nations convention on the rights of the child. Breaching such human rights commitments appears to come easily to this Government, however; we only need to look at the United Nations High Commissioner for Refugees’ comments on yesterday’s Nationality and Borders Bill for another example of that.

One of the core authors of the Child Poverty Action Group report, Dr Ruth Patrick, says:

“the two-child limit is a poverty-producing policy and one which should be removed”,

but what about the voices of the parents who have contributed to those pieces of research? I will quote just one, who says:

“We wear extra layers of clothes as I cannot afford to put the heating on. We shower on a Wednesday and Saturday to reduce energy bills but we shouldn’t have to live like this.”

Nobody should have to live like that, and I am sure the Minister would agree on that point.

As in Scotland, the Welsh Government have tried to take action to counter some of the worst aspects of this policy, the cost of living crisis, and child poverty in Wales, for example through the commitment to extend free school meals to all primary school pupils from September 2022. However, unfortunately, the main problems causing child poverty lie here in Westminster. The Welsh Affairs Committee, on which I sit, recently looked at the benefits system in Wales.

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[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to speak in Westminster Hall, but it is a special pleasure to follow the hon. Member for Glasgow Central (Alison Thewliss). The hon. Lady and I have many things in common—apart from the independence of Scotland, of course. However, when it comes to social issues we are on the same page on just about everything; I can comfortably support her on those issues. I thank her for setting the scene, and I thank all other Members who have contributed.

I love accents. I love the accent of the hon. Member for Cynon Valley (Beth Winter). I hope I have pronounced that correctly—I probably have not. I think the Welsh accent adds to this Chamber; there are a number of Welsh Members who, through their voice and accent, add to the Chamber. I hope that my Ulster Scots accent from Northern Ireland also adds in some way to the Chamber, bringing the cultural values of all four nations together. It is always a pleasure to do that.

I fully support the comments of the hon. Member for Glasgow Central, and indeed those of everyone who has spoken and will speak afterwards. Hopefully, the Minister will give us some succour and support. Opposition Members’ comments are clear, and we look to the Minister in hope of a response. I am going to take a slightly different angle. I think the hon. Lady probably knows this, because she is always well versed in the subject matter, but the London School of Economics has been very clear. Its research set out to explore how the policy, in operation since April 2017, has affected fertility of third and subsequent births, and it said:

“Using quantitative methods, we find the policy led to only a small decline in fertility among those households directly affected. This implies that the main impact of the policy has been to reduce incomes”—

this hits on the issue that the hon. Lady referred to—

“among larger families who are already living on a low income”.

There are therefore two issues to this debate. It continued:

“and hence to increase child poverty.”

Those are the things that this debate and my short contribution will address. That is why I am very much opposed to the two-child policy and its effect on tax credits and universal credit.

[Margaret Ferrier]

Research from the New Field Foundation found that the limit does not discourage families from having more children, and has only worsened their financial difficulties. Does the hon. Gentleman agree that Ministers must actively engage with charities and organisations with expertise in policy impact to understand the real-terms impact of such policies?

[Jim Shannon]

I wholeheartedly support the hon. Lady’s comments.

I am going to say something fairly harsh. I am not a harsh person, or I try not to be, but I always had a fear about the two-child limit—perhaps others agree with me—which is why I opposed what I dubbed at that time the “Chinese limit”. We do not have an authoritarian state just yet, but in China they have—I know they are going to change the two-child rule, or at least they are hoping to change it—and in a way that is the authoritarianism of this DWP directive, which inadvertently or directly has put in place the Chinese limit.

I was talking to the hon. Lady before the debate, and I said that if there had been a two-child limit when our parents were born, I would not be here because my mother would not be here; she was the fourth child out of five. The hon. Lady and others—perhaps even the Minister—would not be here either. If the two-child limit were enforced here with the regularity that it is in China, but with an income base that makes it almost authoritarian, there would be children who are not born—people who would not be here. I want to highlight that dark perspective, because that is where I see this draconian, dictatorial and very authoritarian directive from the DWP going.

Oral Answers to Questions

Margaret Ferrier Excerpts

Monday 21st March 2022 Commons Chamber

[Dr Coffey]

My hon. Friend the Pensions Minister has already set out the huge number of ways that we are trying to increase awareness. I think it is accurate to say, from internal management information, that we have seen a 30% increase in people applying, so we are encouraging take-up. The lowest proportion of pensioners taking up such things are those with an income above the basic state pension who are still entitled to savings credit, and we need to work harder on that. Just getting a few pennies from the state can unlock hundreds of pounds for their costs.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

With the DWP urging benefits claimants to apply for various top-up funds to help with the mounting cost of living crisis, what steps is the Secretary of State taking to increase awareness of the warm home discount scheme and to maximise take-up in my constituency?

[Dr Coffey]

Mr Speaker, having got through all the questions in record time today, you are keeping us beyond 3.30 pm, which is very generous of you—[Laughter.] Perhaps we are being rewarded for our efficacy.

The hon. Lady has been working with my hon. Friend the Pensions Minister on a Bill that will hopefully succeed in the upper House, and she will know that we are working through several avenues to try to increase take-up. The warm home discount will be going up later this year, and we estimate that the number of people who will qualify for the increase in the discount will go up by a third.

Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

Margaret Ferrier Excerpts

3rd reading
Friday 25th February 2022 Commons Chamber

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I beg to move, That the Bill be now read the Third time.

As I said on Second Reading, the Bill will help occupational pension schemes correct a basic issue of men and women being treated differently in contracted-out defined benefit occupational pension schemes because of the impact of having a guaranteed minimum pension, or GMP. It will help pension schemes to meet their legal obligations and ensure that people do not receive less pension income than they would have done had they been the opposite sex. In other words, it will help schemes to correct a situation that is fundamentally unfair.

I am proud to have brought the Bill before the House. I was delighted to hear the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) announce on Second Reading that the Government would support it. The support that the Bill has attracted from across the House is testament to both its importance and its essential simplicity. It makes a few changes to pensions legislation that will help occupational pension schemes to resolve a long-term issue of unequal treatment.

The pensions industry has itself been asking for the measures in this Bill, and as a result of those measures, schemes will be better able to use the GMP conversion process to correct for the differences in pension outcomes for men and women that have arisen as a result of GMPs. It is very pleasing that hon. Members from across the House have recognised and responded to this need.

For the benefit of those who were not present for the previous stages of this Bill, I will give a short recap of its background and purpose. GMPs are the minimum pension that certain occupational pension schemes must provide to their members. Occupational pension schemes that were contracted out of the additional state pension on a salary-related basis between April 1978 and April 1997 are required to pay their members GMPs as a floor that the occupational pension cannot fall below. The intention was that when reaching the age at which GMPs become payable, the amount of GMP that a member of a contracted-out scheme would have accrued would be broadly similar in value to the additional state pension they would have received if they had not been contracted out. Rather than paying a higher rate of national insurance contributions to build up rights to additional state pension, members of salary-related contracted-out schemes built up rights to a GMP.

However, the way that GMPs were accrued by people means that they differ for men and women, due to historical differences of treatment in the pensions system based on people’s sex. People with the same employment history can therefore have different amounts of GMP depending on whether they are a man or a woman, even if they do exactly the same job for the same length of time at the same salary. Both men and women can lose out on pension income in retirement as a result of their sex: it is not as simple as one sex losing out consistently over the other. I have discussed this issue in this House several times now, and I still find it difficult to believe that people can lose out on even a small amount of pension income purely because of these differences.

Fortunately, successive UK Governments have made clear for over three decades that occupational pension schemes need to equalise pensions accrued since then to correct for these effects of GMPs. The High Court confirmed in 2018 that occupational pension schemes must equalise pensions accrued since 17 May 1990 to address the effects of those differences. Occupational pension schemes are therefore required to undertake a process known as GMP equalisation, correcting people’s overall pensions to ensure that they are not lower than they would have been had the person been of the opposite sex. That is why the Department for Work and Pensions published a suggested methodology based on the overall value of the pension, which relies on the process of converting GMPs to normal scheme benefits. It is elements of this process that the Bill before us addresses.

Unfortunately, correcting people’s pensions in this way is proving a very slow process. There are a number of ways in which the task of GMP equalisation could be approached. One way, for example, would be to look at the pension in each year and compare what a man and a woman would have received, and pay the higher of the two. The problem with this approach is that it would result in members getting more overall than either a man or a woman would have received before the equalisation process. This would have been prohibitively expensive for schemes, and would in itself be unfair.

The DWP, working with the pensions industry, proposed a methodology based on the overall value of the pension, set out in guidance for pension schemes to use. This methodology involved converting the GMP into normal scheme benefits using the existing legislative framework. The industry agrees with that approach, but is worried that the current legislation that supports the conversion process has some gaps that the industry believes will leave it exposed to legal risk or potential accusations that it has not equalised correctly.

For example, we need to clarify the way in which survivor benefits are treated in the conversion legislation. The industry has pointed out that the legal requirements for survivor benefits when GMPs are converted are not clear enough. Survivor benefits are the benefits paid out to a scheme member’s widow, widower, or surviving civil partner when the member dies. Schemes need legal certainty and a clear framework before they can move forward with this process. This Bill seeks to provide that essential certainty to schemes.

[Virginia Crosbie (Ynys Môn) (Con)]

In the last 10 years since it was introduced, the automatic enrolment scheme has enabled 4,000 of my constituents on Ynys Môn to establish a pension. I congratulate the hon. Member on this important Bill. Does she agree that it addresses uncertainties in the current legislation and removes the risk of misapplication?

[Margaret Ferrier]

I thank the hon. Member for her intervention and I absolutely agree. This Bill is set to remove those uncertainties so that these occupational schemes can get on with the equalisation process that they have always known they should be carrying out anyway.

The Bill removes the text in the Pension Schemes Act 1993 that sets out what survivor benefits following GMP conversion must look like, and replaces it with a power to set out those conditions in regulations. When this provision was discussed in Committee, I asked the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) to confirm that the Government would consult on the content of those regulations. I am pleased to say that he agreed to that.

Before converting GMPs, pension schemes are required to get the consent of the sponsoring employer that funds the scheme, which might look to be reasonable, considering that the sponsoring employer has invested a lot of money to ensure that scheme members receive a decent retirement income. Unfortunately, it is not that straightforward, because current legislation does not account for all possible situations, such as where the original sponsoring employer is no longer in business. Again, the Bill removes the requirement for employer consent in the Pension Schemes Act 1993 and replaces it with a power to set out in regulations the details of the relevant persons who must consent to the conversion. I am again pleased to say that the Minister confirmed in Committee that the Government would also consult on the content of those regulations.

Finally, the Bill removes the requirement that pension schemes have to notify Her Majesty’s Revenue and Customs when they carry out a GMP conversion exercise. In Committee, the hon. Member for Reading East (Matt Rodda) very reasonably asked what checks would be in place if HMRC no longer had to be notified that people’s GMPs have been converted into other scheme benefits. I would like to reassure the hon. Member that the removal of the requirement that a scheme must notify HMRC if it converts GMP rights into other rights was requested by HMRC. The notification requirement was not a check by HMRC on whether an individual scheme had carried out a GMP conversion correctly. Responsibility for the accuracy of the conversion lies with the pension scheme’s trustees, and they must take advice on certain matters from the scheme actuary.

The requirement to notify HMRC if a conversion has been carried out is simply a legacy of the time when members of occupational pension schemes paid a lower rate of national insurance if they were contracted out. Because both the employer and the scheme members were paying lower national insurance contributions, HMRC used to need to keep detailed records of all contracted-out schemes. However, when contracting out ended for all occupational pension schemes in April 2016, with the introduction of the new state pension, employers and members no longer paid a lower level of national insurance. HMRC therefore no longer needs to be notified.

As this information is no longer required by HMRC, from 2019 it has said to schemes that it no longer requires them to notify it if GMP conversion has been carried out. However, because it is still a requirement of the Pension Schemes Act 1993, schemes should normally still submit such information to HMRC, despite its having no use or need for it. As I said, it costs schemes time and money to notify HMRC, it costs HMRC time and money to process the notifications, and there is no need beyond the current requirement in the 1993 Act for any of this time and money to be spent.

I reiterate to the House that the Bill does not impose any new costs or requirements on occupational pension schemes or their sponsoring employers. As I said, affected schemes have known that they need to equalise pensions for the effect of GMP for many years, and they should have been planning for equalisation. The Bill will simply help pension schemes that decide to use GMP conversion to do what they need to do to ensure payments are fair. I have engaged positively with representatives from the pensions industry, who have long called for these changes and welcome the Bill’s provisions. I am extremely pleased and proud that my Bill will help schemes that want to use GMP conversion to correct for the effects of this issue, and I am delighted by the cross-party support I have received so far and again today.

--- Later in debate ---

[Margaret Ferrier]

With the leave of the House, I thank the Minister for his support today and throughout each stage of the Bill. I also thank all hon. Members who have spoken and who have intervened on Third Reading including the hon. Members for Ynys Môn (Virginia Crosbie), for Broxtowe (Darren Henry), for East Surrey (Claire Coutinho), for Hastings and Rye (Sally-Ann Hart), for Darlington (Peter Gibson) and for Meriden (Saqib Bhatti).

I also take the opportunity to thank the team at the DWP for all their assistance throughout to get to this stage and for their expertise in helping me to understand more of what I was talking about. It has been a privilege to have the opportunity to take a private Member’s Bill through the House, and I encourage all hon. Members to enter the ballot when it comes round again. A private Member’s Bill slot is highly sought after, and it has been a great experience. I look forward to watching the Bill pass through the other place and into law, and I greatly look forward to seeing some of my constituents, and constituents across the UK, finally receive the equalised pension income to which they have been entitled for service since 1990.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Oral Answers to Questions

Margaret Ferrier Excerpts

Monday 7th February 2022 Commons Chamber

[Dr Coffey]

I do not agree with my hon. Friend’s suggestion about the external assessment. I have asked one of my team to look into his report and I am sure we can arrange a suitable meeting, but I want to assure him that all new work coaches are undertaking a level 4 City & Guilds qualification in service delivery.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

The DWP is looking to cut thousands of fixed-term contract work coaches at EO level from jobcentres but reportedly will retain almost all staff at the lower-paid AO grade. Have the Government considered how this will impact on lower-grade staff in terms of workload and stress and how those losing their jobs will afford their living costs until they can secure a new role?

[Dr Coffey]

The hon. Lady will recognise that this is an operational matter, but she is incorrect; I am conscious that she may have been given that information separately. Last week the permanent secretary outlined the start of the process potentially for people on fixed-term contracts. We need to make sure we have the work coaches in the right parts of the country where they are most needed for both current claimants and anticipated future demand.

Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill (Morning sitting)

Margaret Ferrier Excerpts

Committee stage
Wednesday 2nd February 2022 Public Bill Committees

[The Chair]

With this it will be convenient to discuss clauses 2 and 3 stand part.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

It is a pleasure to serve under your chairmanship, Mr Efford. I am grateful to you and to Committee members for joining me today to look at the detail of this legislation, which, as I said on Second Reading, is very technical in appearance but has a clear and simple purpose.

The Bill will help occupational pension schemes to convert guaranteed minimum pensions, at the same time correcting the basic issue of men and women being treated differently in those schemes because of the impact of having a guaranteed minimum pension. This will ensure that people do not receive less pension income than they would have received had they been of the opposite sex. In other words, the Bill will help schemes to correct a situation that has been judged since 1990 to be fundamentally unfair.

On Second Reading, I was delighted to hear the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham, and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) voice their support for the Bill. The hon. Member for Stalybridge and Hyde said,

“We should be doing everything possible to help the pensions industry to fulfil what are now its legal duties to deliver GMP equalisation, and that includes supporting the Bill.”—[Official Report, 26 November 2021; Vol. 704, c. 622.]

The Minister helpfully gave a brief history of guaranteed minimum pensions in his speech on Second Reading, but because of the technical nature of the Bill, it is necessary to give some background today.

The state pension used to be made up of two parts: the flat rate basic state pension and the earnings-related additional state pension. However, as many employees were already members of occupational pension schemes provided by their employer, building up an earnings-related additional state pension as well as an occupational pension was seen to be dual provision, so from April 1978 to April 1997, legislation allowed employers sponsoring a salary-related occupational pension scheme to contract out their pension scheme from the earnings-related additional state pension; in return, the scheme was obliged to pay a guaranteed minimum pension to its members. The intention was that the GMP would be broadly equivalent in value to the additional state pension forgone. In a contracted-out scheme, because the scheme was paying the equivalent of the additional state pension, both the employer and the contracted-out pension scheme members paid lower national insurance contributions.

The GMP rules are set out in legislation. GMPs include important rights to survivor benefits, which I will touch on later. However, the way that GMPs work means that men and women in a scheme with the same pay and service history can end up receiving different amounts of GMP. That is obviously not right and needs to be corrected. It is not even as simple as women losing out on GMPs compared with men. Because the rules around GMPs are very complicated, both men and women can lose out.

The requirement to provide equal pensions for men and women in relation to pension benefits accrued since 17 May 1990 is set out in UK legislation—currently through the Equality Act 2010—and has been as far back as 1995 through section 62 of the Pensions Act 1995. Occupational pension schemes with GMPs are therefore required to equalise people’s pensions to correct for the effect of unequal GMPs for pensions accrued since 17 May 1990. That was confirmed by the 2018 judgment of the High Court in the Lloyds Banking Group Pensions Trustees Ltd case. However, as anyone who has had any involvement with this aspect of occupational pension schemes can tell you, equalising pensions to correct for the effects of differences in GMPs is not a simple process.

The Department for Work and Pensions worked closely with representatives from the pensions industry to develop user guidance on a methodology for equalisation, which was published in 2019. The methodology set out in the guidance involves converting the guaranteed minimum pension into other pension benefits that are not bound by the same complex rules as guaranteed minimum pensions. A person’s overall pension income from their occupational pension scheme can then be more easily corrected for the effect of the differences in retirement income for men and women that the complex guaranteed minimum pensions rules produce. The methodology uses what is known as GMP conversion, or the conversion of guaranteed minimum pensions. The law around conversion of GMPs is set out in the Pension Schemes Act 1993.

As ever with pensions, things are rarely straightforward, and true to type this aspect of pensions legislation is not simple. The pensions industry has long expressed concern that the conversion provisions in the 1993 Act contain uncertainties that could expose occupational pension schemes to legal risks if it is used to correct members’ pensions for the differences caused by the complex rules around guaranteed minimum pensions. Because it is about people’s pension income, it is very important that occupational pension schemes have the clarity they need if they are to be able to use GMP conversion to meet their legal requirement to equalise. Clause 1 clarifies and amends the conversion provisions in the 1993 Act to ensure that pension schemes have the clarity they need to use these provisions. It makes consequential amendments to other pensions legislation.

The pensions industry has expressed concern about certain areas of the guaranteed minimum pension conversion legislation. First, the industry is concerned that conversion legislation is unclear as to whether and how conversion applies to survivor benefits. Survivor benefits are extremely important to many people and are a key part of the concept of the guaranteed minimum pension. If a person has a guaranteed minimum pension, after their death a portion of that pension must be paid to their widow, widower or surviving civil partner. It is often a crucial source of income for someone who has been bereaved, and many people greatly value the knowledge that their surviving spouse or civil partner will receive some pension income in the event that they pass away. Providing financial security for those we leave behind is important to many of us.

Less emotive, but equally important, the pension industry is concerned that the conversion legislation does not make it clear what to do in circumstances where the identity of the sponsoring employer is not clear. The legislation requires an occupational pension scheme’s sponsoring employer to give its consent before the scheme converts guaranteed minimum pensions into other scheme benefits. However, the existing legislation does not cover some increasingly common employer circumstances. For example, if there were multiple sponsoring employers in the same pension scheme and one had ceased to exist, the scheme would have no means of getting the consent of all the sponsoring employers. It is unclear what the legislation requires in such cases.

Finally, the 1993 legislation requires occupational pension schemes to notify Her Majesty’s Revenue and Customs that they have carried out a conversion exercise. However, the introduction of the new state pension means that HMRC does not need to be informed about GMP conversion, because the new state pension no longer contains any kind of contracted-out provisions. That may seem trivial compared with survivor benefits providing a pension income to a person’s survivor, but it results in a lot of unnecessary paperwork for both occupational pension schemes and HMRC.

Clause 1 clarifies the legislation to address these concerns. In subsections (2) to (4), it clarifies both the application of GMP conversion to GMPs paid to a member’s spouse or civil partner, and how survivor benefits must work once an earner’s GMPs have been converted. The clause makes it clear that the GMP conversion legislation can be applied to persons who are survivors at the time of the conversion as well as to the actual earners, and ensures the legislation is consistent in how it refers to that.

Subsection (4) removes the detailed and arguably unclear text in the 1993 Act about what survivor benefits following GMP conversion must look like. Instead, subsection (3)(c) contains a power to set out in regulations the conditions that must be met in relation to survivor benefits following GMP conversion. That means that the Secretary of State for Work and Pensions is being given the power to set out in regulations conditions governing how, when a member’s GMP has been converted, the converted pension must provide for survivor benefits to be paid to a deceased member’s widow, widower or surviving civil partner. That is appropriate because these issues are very technical and detailed. It is obviously extremely important when dealing with something as complex and emotive as the calculation and payment of survivor benefits from former GMPs now converted into other scheme benefits that the issues are considered in detail. The regulations will be able to set out a clear framework for the provision of survivor benefits after the conversion has taken place.

The other great advantage of regulations, of course, is that the Government can hold a full consultation on draft regulations before they are laid before the House. That will ensure that scheme members, scheme trustees, scheme administrators and anyone else with an interest in GMP conversion and/or the survivor benefits to be provided—many people in the UK, I am sure—can comment on, review and suggest changes to the draft regulations before they are finalised. As the content of the regulations will obviously be a matter for the Government, I hope that the Minister will discuss that further as and when he speaks in support of the Bill.

Subsection (5)(a) removes the reference to “The employer” where the 1993 Act requires

“The employer…to consent to the GMP conversion”.

As I said, this is to resolve the currently unsolvable situation that schemes can find themselves in whereby they want to convert GMPs and then equalise people’s pensions to ensure that everyone gets the pension income they are entitled to, but they find themselves unable to do so, for example because one of the sponsoring employers has ceased to exist or it is not clear whose consent is required.

Such problems are not particularly unusual for occupational pension schemes. Pension schemes have very long lifespans, and it is not difficult to see how a scheme set up in the 1980s may no longer be sponsored by the same employer. Subsection (5)(a) therefore replaces the term “The employer” with

“Each relevant person (if any)”.

Clause 1 then gives the Secretary of State for Work and Pensions the power to set conditions in regulations in order to identify “relevant persons”. Again, I expect that the regulations will be technical and detailed, so that they give more clarity than the existing primary legislation. Making such technical and detailed provisions in regulations is quite normal in occupational pensions legislation. As I have already explained, it is very important to ensure that those whose consent is required can be identified. By proposing to give the Government this power, I am holding them to consult on the conditions that will apply to identify “relevant persons”. It is important that the affected members, trustees, administrators and, of course, employers themselves are able to comment on and make suggestions about the Government’s proposed conditions before they are laid before the House.

Clause 1(5)(d) removes the requirement for pension schemes to notify HMRC when they carry out a GMP conversion exercise. As I said, that information is no longer needed by HMRC. It costs schemes time and money to notify HMRC, it costs HMRC time and money to process the notifications, and there is no need beyond the current requirement in the 1993 Act for any of that time and money to be spent.

In addition, subsections (6) to (12) make some consequential amendments to the Pension Schemes Act 1993, the Pensions Act 2007, the Marriage (Same Sex Couples) Act 2013 and the Pension Schemes Act 2015 to take account of the changes I have described.

The hon. Member for Gedling (Tom Randall) said on Second Reading that the Bill is “very technical”. I hope my speeches then and now have clarified what the very complex-looking clause 1 actually does.

Clause 2 replicates clause 1 but for the parallel Northern Ireland legislation. It does everything clause 1 does, but for occupational pension schemes in Northern Ireland. To be strictly accurate, I should say that clause 2 does not quite do everything clause 1 does, as it does not contain amendments equivalent to those made in clause 1(11) and (12) to the Marriage (Same Sex Couples) Act 2013 or the Pension Schemes Act 2015. That is because they are consequential, tidying-up amendments. Clause 1(11) amends a provision that is in primary legislation for England, Wales and Scotland, but in secondary legislation for Northern Ireland, so any equivalent amendment for Northern Ireland would also be made in secondary legislation; and subsection (12) refers to legislation that extends a provision for England and Wales to Scotland, so is not relevant to Northern Ireland.

Rather than going through the entire clause again, I should perhaps explain why clause 2 is concerned with Northern Ireland. As hon. Members may know, private pension legislation is a devolved matter for the Northern Ireland Assembly. However, the convention is that the Northern Ireland Assembly makes pension legislation that mirrors the law in England, Wales and Scotland. It would therefore seem entirely sensible to ensure that pension schemes do not have to operate two different systems depending on whether someone is in Belfast, Birmingham, Bannockburn or Bangor. On this occasion, because of time pressures, the Northern Ireland Executive asked for Northern Ireland to be included in the Bill by amending the relevant parts of Northern Ireland’s pensions legislation. The Northern Ireland Assembly has passed a legislative consent motion agreeing that the UK Parliament can legislate on the matters contained in clause 2.

Clause 3 is known as a “back of the Bill clause”. It sets out vital but standard information on how clauses 1 and 2 are to be brought into legal effect. It also sets out the territorial extent of each clause. Importantly, the cluse also enables the Secretary of State to make transitional or saving provision in regulations in connection with the coming into force of clause 1, and for the Department for Communities in Northern Ireland to make transitional or saving provision by order in connection with the coming into force of clause 2. This will enable provision to be made about pension schemes that have already used the conversion legislation or are in the process of doing so when the amendments come into force, to ensure the amendments do not affect what has already been done under the current legislation.

Successive UK Governments since 1990 have made it clear that occupational pension schemes need to equalise pensions to correct for these effects of guaranteed minimum pensions. It seems wrong that people can lose out on even a small amount of pension income purely because of those differences. That is why I am extremely pleased and proud that my Bill will help schemes which want to use GMP conversion to correct for the effects of this issue. I am delighted by the cross-party support I have received again today.

--- Later in debate ---

[Margaret Ferrier]

I thank all those who have contributed to this short, constructive debate and all Members who agreed to serve on the Committee. I also thank all those who contributed more widely to the small but incredibly important changes made by the Bill, and ask that everyone continues that cross-party support until we get the Bill over the line. I also thank the Minister for his support throughout, and I thank the hon. Member for Reading East.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Cost of Living

Margaret Ferrier Excerpts

Tuesday 25th January 2022 Westminster Hall

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

It is a pleasure to serve under your chairship, Mrs Cummins. I congratulate the hon. Member for North Ayrshire and Arran (Patricia Gibson) on securing today’s important debate, which keeps a spotlight on an issue that impacts every person across the UK—including in my constituency. The current rate of inflation is 5.4%, which is the highest it has been in three decades. The Bank of England expects the consumer prices index to peak at around 6% in April, but others have a grimmer forecast—Goldman Sachs expects it to hit around 6.9%.

The cost of living crisis must not be underestimated; every essential will cost more and every penny must stretch ever further. In-work poverty has become more common, which is ironic under the leadership of a Government who claim to incentivise work. In April, benefits will be uplifted in line with inflation, but as inflation stood in September; inflation was only at 3.1% then, so this will represent around a 3% real-terms cut in 2022. In October, the Government chose to remove the £20 universal credit uplift, which is needed now more than ever. That was before inflation hit its current high.

There are some obvious areas that we can immediately recognise as stressors, such as energy prices and the cost of food, but there are other problems that we might not see so suddenly. Social housing, one of the UK’s greatest supports for low-income families, is in short supply; demand simply cannot be met, so we see people forced towards an unaffordable rental market. In the year until September 2021, rent across the UK had already risen an average of 8.6%. If Greater London is excluded, that figure lessens, but only to 6.6%. Private properties, for the vast majority, require a hefty deposit, which is a huge upfront cost. We know that it is often cheaper in the long run to spend more in the short term, but that is not an option for those on lower incomes. Homeowners face anxieties too, as the interest rates on mortgages increase; they may struggle to keep up and there is a possibility that some may lose their homes—the roof over their families’ heads.

Another worry is car insurance. It is cheaper to pay it annually in a lump sum than monthly, the cost of which has just hit a 12-month high. A car might seem like a luxury, but for so many it is a necessity; it is how people commute in rural areas or in areas where there are poor transport links, and how people undertake caring responsibilities for family members. Those on low incomes are also more likely to have a poor credit rating and less likely to recover from debt—they may need to access short-term, high-interest payday loans. Previously, these loans may have been used to cover unexpected large expenses, such as a car breaking down or to replace white goods. However, there is a real risk that these loans are now going to be taken, out of necessity, to cover basic living expenses.

Credit cards pose the same risk; what happens when next month rolls around and people have the same expenses to cover but a couple of hundred pounds less in the bank to cover last month’s lending? It is a dangerous cycle and one that the Government must do everything in their power to prevent—these are not options that people should have to consider.

What if someone becomes sick? Statutory sick pay in the UK is the worst in Europe, at £96.35 per week. From April, a full-time job earning the national living wage is over £230 per week. I had a constituent contact me last week because she had missed the deadline for the warm home discount. She has no frequent internet access, a pay-as-you-go SIM card and she did not have the money to top up and call her supplier in time, so she lost out.

The Government cannot rest on their laurels any longer. Their own Back Benchers are calling for the national insurance hike to be scrapped; even the Chancellor is seeking to distance himself from it. It is clear that there is a need for action. I plead with the Minister and his colleagues: please, do not leave it until it is too late. Let us help our constituents through this difficult time.

Work and Pensions

Margaret Ferrier Excerpts

Wednesday 5th January 2022 Ministerial Corrections

The following is an extract from Work and Pensions questions on 13 December 2021.

[Margaret Ferrier]

A free university-level education is a monumental benefit of living in Scotland. What discussions has the Secretary of State had with her colleagues in the Department for Education about the benefits of making higher levels of education accessible and the impact that would have on the employability of young people?

[Dr Coffey]

I am conscious that the hon. Lady thinks that just because there is a free course, those people who are most disadvantaged in her country will take advantage of it. In fact, that has not been the case; we see far more people in England from less privileged backgrounds getting into university and benefiting from that. It is important that we have a balanced approach, recognising the importance of level 3, 4 and 5 apprenticeships in particular and the fact that, once they have graduated, those people will be better off financially, except compared with those in Russell Group universities, within 10 years.

[Official Report, 13 December 2021, Vol. 705, c. 778.]

Letter of correction from the Secretary of State for Work and Pensions:

Errors have been identified in my response to the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier).

The correct information should have been:

Oral Answers to Questions

Margaret Ferrier Excerpts

Monday 13th December 2021 Commons Chamber

[Dr Coffey]

I thank my hon. Friend. He will be aware that in the original primary legislation, which allowed for disregard, only Northern Ireland specifically was considered, so I am very pleased to have brought that disregard forward. At the same time, we wanted to take a consistent approach, so I am pleased that we will be applying the same disregards to the forthcoming payments being made by the Scottish Government and through, I think, Islington and Lambeth Councils. I commend him and his Committee Members for their pursuit of the matter.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

A free university-level education is a monumental benefit of living in Scotland. What discussions has the Secretary of State had with her colleagues in the Department for Education about the benefits of making higher levels of education accessible and the impact that would have on the employability of young people?

UN International Day of Persons with Disabilities

Margaret Ferrier Excerpts

Monday 6th December 2021 Commons Chamber

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

As chair of the all-party parliamentary group for disability, I am delighted to take this opportunity formally to mark United Nations International Day of Persons with Disabilities here in the House of Commons. This is an annual day that seeks to promote the rights and wellbeing of persons with disabilities at every level of society, and to raise awareness of their wellbeing in all aspects of political, social, economic and cultural life.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

Next year marks the 150th anniversary of the legislation that gave the right to vote in secret, but this is not the reality for many blind and partially sighted people. Does the hon. Lady agree that not only must this right be protected but work must be undertaken to ensure that there are practical options in place at all polling stations across the UK?

[Dr Cameron]

I absolutely do agree that those rights should be enshrined and that the democratic process should be open to all.

Pension Schemes (Conversion of Guaranteed Minimum Pensions) Bill

Margaret Ferrier Excerpts

2nd reading
Friday 26th November 2021 Commons Chamber

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I beg to move, That the Bill be now read a Second time.

First, I want to congratulate the right hon. Member for North Somerset (Dr Fox) on the progression of his Down Syndrome Bill, which I very much support.

My Bill makes changes to the legislation governing the way occupational pension schemes can convert guaranteed minimum pensions into other scheme benefits. The Bill is very technical looking, but it is extremely important. It will help occupational pension schemes to correct a basic issue of men and women being treated differently in those schemes because of the impact of having a guaranteed minimum pension. It will help enable pension schemes to ensure that people do not receive less pension income than they would have received if they had been the opposite sex. In other words, it will help schemes to correct a situation that has been judged since 1990 to be fundamentally unfair.

Guaranteed minimum pensions, or GMPs, are the minimum pension that certain occupational pension schemes have to provide to their members. This applies to occupational pensions contracted out of the additional state pension between April 1978 and April 1997. It ensures that members receive a broadly similar amount of pension income in retirement as they would have received had they not been contracted out.

However, guaranteed minimum pensions differ for men and women, reflecting historical differences of treatment in the pension systems based on sex. People with the same employment history can have different amounts of guaranteed minimum pension depending on whether are men or women, even if they do exactly the same job for the same time at the same salary. It is not even as straightforward as men getting higher guaranteed minimum pensions than women; in fact, both men and women can lose out on pension as a result of their sex.

Successive UK Governments have made it clear since 1990 that occupational pension schemes need to equalise pensions to correct for these effects of guaranteed minimum pensions. In 2018, a High Court judgment confirmed that occupational pension schemes must equalise pensions to address these differences. Speaking as someone who has worked and built up occupational pensions of my own, it seems wrong that people can lose out on even a small amount of pension income purely because of these differences. Occupational pension schemes are therefore required to do something called equalisation—going back and correcting people’s overall pension to ensure that it is not lower than it would have been had the person been of the opposite sex.

[Tom Randall (Gedling) (Con)]

I thank the hon. Lady for bringing the Bill forward. She is talking about the history of this technically complex issue, which goes back to 1990. Does she agree that the changes introduced by the Bill are well overdue and that, by bringing it forward, we will get the change that we should have had a long time ago?

--- Later in debate ---

[Margaret Ferrier]

The hon. Member is spot on; the change is well overdue. I will come to that, and I am sure that the Minister will answer that point too. I think the pension schemes have found some difficulties; as I say, I will come to that.

It is important to be clear that no one will have money taken away from them as a result of the Bill when pensions are equalised. If it turns out that someone is entitled to more guaranteed minimum pension than they would be entitled to if they were the opposite sex, nothing happens; that advantage is not taken away. The Bill seeks only to increase pension income for those already losing out because of their sex due to the nuances of having a guaranteed minimum pension. It is also important to be clear that this is not about giving anyone extra pension that they are not entitled to; it is simply about making sure that no one loses out on pension income as a result of their sex.

If one person has a smaller guaranteed minimum pension than another purely because the first person is male and the second female, their overall pension entitlement needs to be corrected. However, correcting people’s pensions in this way is proving a very slow process, as the hon. Member for Gedling (Tom Randall) said. The Department for Work and Pensions, working with the pensions industry, tried to cut through the complexity by offering a methodology, set out in guidance, for pension schemes to use. The methodology involved converting the guaranteed minimum pension into what I will call normal scheme benefits, using existing legislation already on the statute book.

The industry agrees that this is a sensible approach, but has pointed out that the legislation supporting the conversion process contains some uncertainties that it believes will expose it to legal risk and potential accusations of not equalising correctly. For example, the way survivor benefits are treated in the conversion legislation needs to be clarified. The industry has pointed out that legal requirements for survivor benefits when guaranteed minimum pensions are converted are not sufficiently clear. Survivor benefits are the benefits paid out to a scheme member’s widow, widower or surviving civil partner when the member passes away, and are therefore extremely important.

Equalising someone’s pension to take account of the differences that arise because they had a guaranteed minimum pension is, as I have said, very important, but schemes need clarity and legal certainty before they are able to proceed with this essential process. That is what the measures in my Bill seek to provide. Similarly, before converting guaranteed minimum pensions, pension schemes are required to get the consent of the sponsoring employer that finds the scheme. That sounds entirely reasonable, since after all the sponsoring employer has invested a lot of money in the scheme to ensure that its employees have a decent retirement income.

Unfortunately, that is not as straightforward as we might expect because the current legislation does not cover all situations, such as where the original sponsoring employer is no longer in business. As a result of this lack of clarity in the legislation, some pension schemes have held off equalising for these effects of guaranteed minimum pensions. This Bill will help with that by rectifying those uncertainties and clarifying the legislation that schemes will use if they follow the methodology set out in the Department for Work and Pensions guidance.

I should make it clear to the House at this point that the Bill does not impose any new costs or requirements on occupational pension schemes or their sponsoring employers. Affected occupational schemes have known that they need to equalise pensions for the effect of guaranteed minimum pension for many years and should have been planning accordingly. The Bill will simply help pension schemes to do exactly what they need to do to stop people losing out.

I have engaged with representatives from the pensions industry, who welcome the provisions. The industry has long lobbied for the clarifications in this Bill to be made. I should hope that all here recognise the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) sitting opposite me today; I am delighted to say that the Government have decided to support my Bill. It is good to be working with the Government to make things easier for pension schemes.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I congratulate the hon. Lady on bringing forward this Bill. She is speaking extremely well on a very technical area of pensions law. On the devolution point, she will know that Stormont has agreed to deal with the same issue, which is devolved to Stormont, through this Bill. Does she agree that that is a good example of where this Parliament and the devolved Parliaments can work together to achieve a desired positive outcome?

[Margaret Ferrier]

I thank the hon. Member; I am not sure I agree wholeheartedly with all his intervention, but the Bill extends to England, Wales and Scotland, and Northern Ireland, as he mentioned, has asked to be covered by it as well. This particular Bill extends to the whole UK and I am happy that it includes Scotland as well, unlike the Bill of the right hon. Member for North Somerset, which only covers England. As I said, it is good to be working with the Government to make things easier for pension schemes in fulfilling their obligations to their members and to ensure that benefits are paid correctly to members of occupational pension schemes.

I will not take up a lot of time, because the hon. Member for Meriden (Saqib Bhatti) is looking to give his Bill a Second Reading as well. But before I finish, there are quite a number of people on the DWP team who I would like to thank as they have helped me considerably: Narinder Clarke, Anna Smith-Spark, Gareth Thomas, Katy Marcus, Maria Burgess and David Brown. Of course I also thank my parliamentary assistant Kim Glendenning, who has helped me considerably in pulling all this together, the Pensions and Lifetime Savings Association and the Minister.

--- Later in debate ---

[Mr Holden]

I thank the Minister for that intervention.

Some of the changes, particularly the lowering of the earnings threshold, could be introduced in secondary legislation, but primary legislation will be required to extend the auto-enrolment to 18 to 21-year-olds; I should let the Minister know that I have a date for a ten-minute rule Bill in the new year to do just that.

I very much hope that the Government will look at lowering the threshold. Low-paid women with multiple jobs in particular could be missing out on many thousands of pounds going into their pension pots. Low-paid women with multiple jobs in particular are potentially missing out on many thousands of pounds going into their pension pots due to issues around auto-enrolment. It is another inequality in the system that, as the hon. Member for Rutherglen and Hamilton West mentioned, tends to affect women disproportionately.

[Margaret Ferrier]

I just want to clarify that the rules around guaranteed minimum pensions are very complicated, so both men and women can lose out if pensions are not equalised because of indexation and revaluation. I am sure the Minister will cover that in his closing speech, but it is about two people. Sometimes women can have a higher pension and then the man will overtake it, or vice versa, because of the different ages of retiral. I just wanted to make it clear that both sexes can lose out.

[Mr Holden]

That is an incredibly important point. Both sexes can lose out and that is another element with auto-enrolment. There will be men in part-time work, maybe with caring responsibilities, who will also be in a similar situation.

The Minister has been a real reformer and is reforming an awful lot. I know there is a lot more to do. I encourage him to think broadly and work with Members across the House to continue the great reforming work he is doing. It has been great to see him working with the hon. Member for Rutherglen and Hamilton West. I hope to work with him in the future as I start to push for further reforms.

--- Later in debate ---

[Margaret Ferrier]

I thank the Minister for his support in this important matter. He touched on the ballot for private Members’ Bills. I was delighted to be one of the successful 20; I am sure any Member who puts in for the ballot is keen to come out as one of those 20. I am grateful to all Members who have spoken today for their valuable contributions: the hon. Members for Stourbridge (Suzanne Webb), for Hastings and Rye (Sally-Ann Hart), for North West Durham (Mr Holden), for Gedling (Tom Randall), for Dover (Mrs Elphicke), for Stalybridge and Hyde (Jonathan Reynolds) and for Berwickshire, Roxburgh and Selkirk (John Lamont).

Correcting this basic issue of men and women being treated differently in these schemes because of the impact of having a guaranteed minimum pension that affects their hard-earned pension income is important. Although the Bill is small and technical, we should not underestimate its value. It should help schemes to use the guaranteed minimum pension conversion legislation to provide equality for affected pension scheme members by bringing much needed clarity for the industry that administers them. I am heartened and grateful that there is clear cross-party agreement on this issue, and I very much look forward to taking the Bill through its remaining stages.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).