State Pension Age (Women)

Alison McGovern Excerpts

Wednesday 11th May 2011 Westminster Hall

[Teresa Pearce]

I certainly do and I thank the hon. Lady for her intervention. It was not that long ago, and it was certainly after the proposal was first made, that if someone went on to the website to look at their pension forecast, it was still set at the old rates. I think that that has been changed now, thank goodness.

As I was saying, there has already been one movement forward so that people have to work longer. Now, there is another one. People are understandably angry about that and feel let down by the Government, because there was a covenant between them and the Government: “If you pay in, we’ll do this.” These people have done their part, but the other part is not coming forward.

Many people who are approaching state pension age have already taken steps to reduce their hours of employment or have taken on caring duties with elderly parents. Where their children are getting married, they have promised to look after their young grandchildren in the next few years, when their children return to the work force.

One constituent, Susan Harris, from Belvedere, was a teacher for 30 years. In 2005, she took early retirement and a reduced pension. She told me she had made calculations based on when she thought she would receive her state pension. She thought she was making an informed decision—she was planning. Sadly, she is now one of the unfortunate women facing a two-year loss in pension income. It is not surprising that she feels the Government are being unjust and have broken their promise to her about when she would receive her pension.

What assessment has the Minister’s Department made of the proposal’s effect on the number of unpaid carers and child minders in the UK? The accelerated timetable means that many people who would have taken up caring for relatives or providing child care when they retired so that the next generation could join the work force will not be able to do so, because they will be at work for another two years. The Government must consider that important social policy impact.

I would also be interested to hear the Minister’s thoughts on what the proposals will mean for volunteering and the big society. People who have retired are not inactive; they volunteer at local libraries, charity shops and lunch clubs. They also act as school governors and provide much needed care in our communities. If they are kept in the labour market for longer, they are less able to volunteer in those ways. In pushing people to work until they are much older, we are in danger of compromising activity outside the labour market, which we value very much.

It may not be easy for the women affected by the proposal to get another job or to increase their hours to fill the two-year gap, especially at such short notice. I am sure that I am not alone in receiving an increasing number of letters from constituents in their 50s who are willing to take any kind of work, but who are finding it impossible to get a job. It is not easy for people to return to the labour market once they have left, and it is becoming increasingly difficult to hang on to a job in later years, too. If women are expected to work longer, there needs to be work for them to do, and that is particularly important given the current economic situation and the rise in unemployment. In looking for work, these women may well be competing against their own grandchildren in the labour market.

Many women will not have enough savings to fall back on if they cannot hang on in the labour market. Women who have been employed in low-pay work, or who have taken time out to have children or to act as carers, will have few savings to cover them for the period between when they expected to retire and the proposed state pension date. Those women now face an uncertain future. Will the Minister outline the measures the Government plan to introduce to help them work longer? Will he comment on how women who are not in work are meant to balance their finances in the two-year gap, given that they will be eligible for jobseeker’s allowance for only six months if they have savings and will not be eligible at all if they have a small occupational pension?

I want to focus for a moment on women who have worked in low-pay or manual jobs, because class differentials need to be taken into account, as my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) said. The Minister has defended the accelerated timetable on the basis of fairness and has said that a balance must be struck as life expectancy continues to rise, because we cannot expect the workers and companies of today to shoulder all the costs. However, while overall life expectancy has increased by 5.5% for women and 6.5% for men, it has not increased uniformly, and there are still deep socio-economic and regional differences in average life expectancy. Office for National Statistics figures show that women’s life expectancy at the age of 65 is highest in the royal borough of Kensington and Chelsea, where women can expect an additional 26 and a half years. However, in Greenwich and Bexley—the two London boroughs that cover part of my constituency—the figures are much lower, at 20 and 21 years respectively. Women’s life expectancy at 65 is even lower in Glasgow city, where women can expect just an additional 17 and a half years. The 2010 Marmot report into health inequalities found that people living in the poorest areas live seven years less on average than those living in the richest areas.

Women in poorer areas, many of whom are from working class backgrounds and have been in low-income jobs, will be hardest hit by the accelerated timetable. They are the least financially equipped to deal with the change, and their lower life expectancy means they will get less time to enjoy their retirement. There is also the issue of women manual workers, who will struggle to continue to work if their jobs are physically demanding. A constituent in Plumstead recently wrote to me, saying:

“It is particularly hard on me because I am a manual worker. I have already been ‘pacing myself’ if you like, for my retirement. I don’t think I will physically be able to continue fork lift driving and hulking boxes around at the later age. If I’d known I would’ve changed my job but it’s too late now. It’s not fair on me.”

I was hoping that my right hon. Friend the Member for Croydon North (Malcolm Wicks) would be able to make the debate, because he has done some excellent research on the impact that the accelerated timetable will have on men and women of different social classes. I hope the Minister is aware of that research and that the Government will take it into account.

Although the proposed accelerated timetable directly affects a comparatively small group of women, its impact will be felt more widely. Extended family members may have to contribute financially to help women cover the costs of the period between when they expected to get a pension and when they actually receive it. The change will also affect many men of pensionable age because they cannot claim pension credit until their wife or partner reaches pension age. The change will therefore affect the whole household.

The Government need to think carefully about what they are asking of a small group of women who have worked hard all their lives. These women are being told to pay a disproportionate cost with little notice. They have earned a decent retirement, but many fear they will be too old and frail to enjoy it. A constituent from Belvedere wrote to me recently to say:

“I have been working since I was 16, have paid all my contributions and was looking forward to enjoying my retirement. But now it looks like I will be too old to do anything except watch telly if they keep altering the age. I suppose the Government does not care about the people who vote them in.”

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that one of the wider consequences relates to trust in the pensions system? When daughters see their mothers being somewhat misled, and when they see the Government change their plans in this way, they lose faith in our pensions system, and we can ill afford that.

[Lilian Greenwood (Nottingham South) (Lab)]

rose—

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[Steve Webb]

I suspect that the hon. Lady will not benefit from our proposals, as I imagine that she would have received a full basic state pension anyway, whereas the proposals will help some women who would not have received it. By being employed here, she is also contracted out of SERPS, resulting in a deduction from the £140. I do not actually think that she would benefit.

I do not dispute for a second that that set of women will be affected by the changes, but the pension that they will get under our proposals will be significantly better on average than that received, for example, by women who retired a few years earlier. We can do all sorts of comparisons between this group and that group. Some things will be better for some and some will be worse. What I am saying is that several hon. Members have said, “You used to campaign for women’s pensions, but you don’t care any more,” but I have spent all my time as a Minister working on proposals that will benefit women pensioners specifically.

[Alison McGovern]

Will the Minister answer a specific point? He made it clear that the reason why he felt compelled to introduce further changes was that what he inherited did not meet the terms of the Turner review. The Turner review advised allowing people 15 years to plan for changes, but women in our constituencies have had much less time than that—barely five years—to plan. That is not fair. Will he explain why his Government are doing that to women in our constituencies?

[Steve Webb]

The things that Turner recommended are not consistent with each other. We cannot, for example, have a consistent percentage of income during life in retirement and give 15 years’ notice at the same time, because longevity is increasing much faster than that. Something somewhere has to give.

One point that has been missing during this debate—the only time that it was mentioned was when an hon. Member quoted me from last week’s debate—is that if we delay till 2020, as the hon. Member for Leeds West (Rachel Reeves) proposed, we will have to find £10 billion. My hon. Friend the Member for Argyll and Bute (Mr Reid) raised an important point, and he is analytically correct: that does not help us in the comprehensive spending review period or help the long-term structural deficit, because the age would have been 66 anyway. However, it does do one thing: it takes £30 billion—or rather, £10 billion; the whole change amounts to £30 billion, but the difference between the two of us is £10 billion—off the national debt. As he knows, servicing the national debt is one of the most crippling things that this Government must do. That is why such difficult decisions must be made.

Our changes will take £30 billion off the national debt. I do not know what the interest rate on the national debt is, but let us say 5% for the sake of round numbers. That is just to make the numbers add up; I do not suppose for a minute that it is 5%. That is £1.5 billion extra every year to spend on services or whatever rather than on the national debt. I think that that would be the hon. Lady’s preferred solution.

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[Steve Webb]

That is not what the previous Government did. We would love to be able to say to people who are 40 or 45 years old, “This will be your pension age.” However, if we said that to 45-year-olds, who have another 20 years or more before they retire, and another 20 to 25 years of life in retirement, we would be locking in what we know about longevity now for pensions that we will still be paying in 50 years’ time. That is just not viable.

[Alison McGovern]

Will the Minister give way?

[Steve Webb]

In a moment. The pace of improvement in longevity is breathtaking. Between 2004 and 2008—the longevity projections of 2004 are, I think, what the previous Government’s legislation was based on, and those of 2008 are what we have now—life expectancy at pension age increased by well over a year in just four years. It is almost like a runaway train. We can always say, “Let’s wait another decade,” but one of the problems is that there is a trade-off, because, as I have said, what has been missing from this debate is the people who have to pay.

Delaying for 10 years, which is what I think the hon. Member for Leeds West is suggesting, does not mean a free lunch. It would mean a £10 billion national insurance hit on today’s workers and today’s firms. If she were wearing another hat, the hon. Lady would be saying, “The recovery is fragile and we need to do more for jobs and to boost the economy,” but what she is saying is that we should levy another £10 billion of national insurance on today’s workers, including low-paid women who do not have much pension, and today’s firms, which may have to lay off people who will not then be able to build up decent pensions. There will be no free lunch if we delay.

[Steve Webb]

There is a queue. I shall give way to the hon. Member for Wirral South first.

[Alison McGovern]

If, as figures last week suggested, the Government fail to meet their own target to balance the books over the course of this Parliament and we still have a deficit for which the Government have not planned in 2015-16, will we have more pensions Bills to push people’s pensions further back in order to incorporate what the Minister has said about being fair to those who are paying now?

[Steve Webb]

We have made it clear that the age-66 changes are in the present Pensions Bill, which will be legislated for long before the end of this Parliament. We are also consulting in the Green Paper on a systematic mechanism for going beyond 66 that takes account of all the factors that we have talked about. That will try to strike a balance between notice, which is important, and fairness for those who bear the cost of increased longevity. The intention—this is something that no previous Government have done—is for the further changes to do it in a more systematic way. The 60 to 65 equalisation was a response to a legal case. The previous Government’s plans for 66, 67 and 68 were not ad hoc exactly, but there was no mechanism in place to respond to subsequent improvement in longevity. What we are trying to do as part of our reforms, which we are consulting on at the moment, is give people the certainty that future Governments will not just pass a law and change things, but that there will be a structure in place and that they will know how it is going to be.