Pensions Bill

Anne Begg Excerpts

Monday 17th June 2013 Commons Chamber

[Mr Duncan Smith]

I hear my hon. Friend, and I would simply say to him that that would cost a sum knocking on the door of between £650 million and £700 million a year. Other Governments have considered it. I would be happy to discuss the matter with him, however, and to reflect on it. I am sure that those sitting further down the Bench will have heard his desire to serve on the Committee, although whether my hon. Friend the Minister of State would want that is another matter altogether.

[Dame Anne Begg (Aberdeen South) (Lab)]

If the Secretary of State is not prepared to go as far as the hon. Member for Worthing West (Sir Peter Bottomley) requests, will he perhaps look again at the Select Committee’s recommendation that the anomaly could be changed for those who reach pension age after April 2016? I appreciate that it would be expensive to change the system for those who are historically already in payment, but that might not be the case if the change related only to new pensions.

[Mr Duncan Smith]

Whenever the hon. Lady speaks, I always want to help her, particularly as I am due to appear in front of her Committee shortly. I really want to be as nice as possible to her, but I am not sure how much hope I can give her. My hon. Friend the Minister of State and I are certainly always happy to look at these proposals, but I come back to the point that it is difficult to do anything about them at the moment, because these things cost significant amounts of money. I recognise the concerns that are being raised, but these are expensive items and, right now, I do not think that we could possibly schedule in such changes. I am happy to discuss the matter further with the hon. Lady, however, as is my hon. Friend.

The regular review of the state pension age will ensure that the issue is considered in every Parliament, which will avoid the necessity for future Governments to have to take emergency action, as we did earlier. Men and women retiring at 67 in 2028 can expect to receive a pension for roughly just as long as those retiring at 65 today. The review will work on the same principle—namely, that people should spend a given proportion of their lives drawing a state pension. By regularly considering the state pension age in the light of changing life expectancy, we can ensure that our pension system remains on firm foundations. That will ensure a continuing and fair social settlement between young and old.

Another long overdue element of reform in the Bill relates to bereavement benefits. As we bring our pension system into the 21st century, we must do the same with our bereavement benefits. They form an important part of our state safety net, but they have remained unchanged for too long. They now reflect a time gone by, in which the life of a widow was quite different from what it is today. The conclusion, after long discussion, is that we have an outmoded system of complicated payments and contributions that, at worst, can harm people’s long-term job prospects by distancing them from the labour market.

While protecting existing recipients, the Bill makes provision to simplify the system through a lump sum payment followed by 12 monthly instalments. The new system will help spouses and civil partners to deal with additional costs in the critical time immediately after a bereavement when that help is most needed, as well as giving them the space and time to settle and resolve most of the other issues that require financial support. Those with dependent children will receive a £5,000 lump sum and £400 a month for 12 months. Those without children will receive a £2,500 lump sum and £150 a month for 12 months. This is not a saving measure. I can absolutely guarantee that the money being applied to this will go back into it, although it will be more narrowly focused over a particular time scale.

I believe that the Bill has the general support of both sides of the House, by and large. It is a genuinely good example of coalition politics coming together to find a solution for people who are unable to change their circumstances following retirement and who want simplicity and the certainty of a commitment by whichever Government are in power that their income will remain at a level that allows them to sustain their position in life.

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[Nigel Mills]

I agree wholeheartedly. I think we have all had people come to us with calculations saying, “What will I get under this new pension? What would I have got?” When trying to talk them through it, there is an especial problem with people who do not understand that those who have contracted out for most of their working life will not get the full £143. They think a bonus is coming—that they will be £35 a week better off—whereas they might just miss out. We need to write to people before the change, saying, “Here’s what you’ve accrued”, “Here’s what will happen after the change”, “It looks like you’ll get your full £143 a week”, “It look like you won’t get the full £143 a week”, “Here’s what you can do”, “Are you due any credits for periods spent caring for children or other things?”, “Have you missed any years’ contributions?” We have to communicate all that clearly so that people have the information in time to make those decisions.

[Dame Anne Begg]

Does the hon. Gentleman agree that a remarkable number of people do not know that they have been contracted out or qualify for credits through the home responsibilities protection and other things and that it will come as a surprise to them that they might have more credits than they had anticipated?

[Nigel Mills]

I absolutely agree. The system is so complicated that it is hard for any of us to know exactly what we are entitled to. It is scary when a constituent says to me, “You were on that Committee. Explain how this will work.” From my days as an accountant, I know how to write lots of caveats, so I e-mail them back saying “I think it might be this, but I’m not an adviser, I don’t know your actual circumstances,” and so on. Key to this reform being successful and retaining support, therefore, is how we tell people what they are entitled to, what they can do, what they need to do and when to do it by.

There are some useful things in the Bill, including the tweaks to auto-enrolment, which I think we all welcome. It is right to cap consultancy fees for auto-enrolled schemes, because if the state is, if not quite forcing people into a savings system, certainly encouraging them strongly to do so—through the opt-out—the auto-enrolled scheme must be a fair and decent one, and that means not being ripped off by excessive charges. We should be saying, “This is the most you can charge people. You cannot add unnecessary and expensive consultancy fees”. Therefore, the provisions in the Bill are a welcome change, even to a free-market, non-regulatory person such as me. It is the right direction to head in.

The provisions on the transfer of dormant pots are also a step in the right direction. When starting to think what retirement might bring, one wants to know how much pension income has been accrued, but that can be hard. If someone has changed jobs a few times, they will have lots of small pots, which means they will get those strange, complicated documents once a year that they do not understand. Even if they read them, they will not be able to work out the income it will equate to in retirement. If those pots were moved into a single pot, they would get only one statement. If we made that information clear, they might find out that they have accrued only a third of what they want and that they need to take action several years before retirement.

That is a welcome step. I asked the Secretary of State earlier whether we could use this Bill to make changes to the National Employment Savings Trust so that those who choose to use the scheme or their employers who use it can make those transfers. I am not quite sure what the situation will be for those who think they can transfer their pot but cannot, even though their employer might have chosen one of the best schemes out there. We need to get that clear in the system as soon as we can, so that people understand how that will happen. As the Bill proceeds in Committee and on Report, I hope those changes to NEST can be sneaked in, once the consultation ends. I suspect that some attempts to table amendments to that effect might be made in Committee, if the Government have not quite got there—not that I am saying I will draft them or am in any way qualified to achieve that, which I suspect is well outside my skills.

One issue leading on from auto-enrolment and NEST is the fact that the regulator responsible for auto-enrolment is the Pensions Regulator, yet most auto-enrolment is into contract-based defined contribution schemes, for which the Pensions Regulator has no responsibility. We are in a slightly strange situation. Everyone out there thinks, “There’s a Pensions Regulator,” yet most people’s pension schemes are probably not caught by it. They have no redress to that regulator and instead have to go to the Financial Services Authority, or the Financial Conduct Authority or whatever it is called now—the organisation that did such a good job with the banks that we entrusted it with pensions as well.

I am not entirely convinced that that is the right place, partly because when the FCA gave evidence to us, it did not seem to be giving pension schemes quite the focus that such an organisation ought to give them, as I suspect members of the Committee who were present would agree. There is real confusion out there about who does what in the pensions regulatory system. There is an attraction to having the role of supervising individual pension schemes all in one place—that place being the Pensions Regulator. I accept that the Minister recently replied to the Committee with some sensible reasons why he comes down on a different side of that line, but this issue is worth exploring, to ensure the right protections as more and more people move into contract-based defined contribution schemes, which is a hugely important sphere.

While we are on the Minister’s response to the Select Committee, may I welcome the fact that the start date for the change has made its way into the Bill? I questioned him quite strongly about that on the Committee, because this is a fundamental change to the pension that millions of people can expect, and to have the date slip by some accident or change of policy after the election would be hugely disadvantageous. If the date changes by even six months, that is six months’ worth for people who retired thinking they were getting £143, but who would then drop back into the old system. That would be disastrous, and all those women we have taken out would be dropped back in. I suspect that none of us would fancy that, so having the start date firmly in primary legislation in this Bill has to be right. I welcome the fact that the Minister listened, although I also hope that his power in the Bill to change the date by order is not one that he plans to use. I would have thought that the power should lapse—maybe in March 2015—so that it cannot be changed once we are a year from the start date. It would be awful if less than a year’s notice was given of a slip by six months or something like that.

We also welcome the fact that the Government listened and capped the minimum qualification period. We all accept that it is not right for our taxpayers to provide pensions to people who had a short stay here or to spouses who have never come here and who, by the time they retire, have had 40 years in a different state and have a pension there. It is not right to give them a small state pension that we have to administer. It is right to say, “If you haven’t paid in for this number of years, then you get nothing.” For that period to be more than 10 years would have been unfair—someone who has paid into a system for 10 years probably deserves something back out. It is right that the Bill has a cap at 10 years and we will see whether the Government choose seven years, 10 years or somewhere in between as the process continues.

I have had a gentle canter through what is in the Bill and some of the things I might have liked to see in it to improve things for people paying into private pensions. I am sure we can explore those as the Bill proceeds.

I am reluctantly content with the idea of increasing the state pension age—I suspect that future Governments might be grateful for this one. However, some kind of mechanism should be put in place to force a review every Parliament or every five or six years to see what the decision has to be. Increasing the state pension age by another year will never be politically popular, as a few hundred thousand people will then be retiring later than they wanted to. However, it would be right and fair to have a transparent mechanism—or transparent-ish: it would only force a review, not be a real power—so that we said to people, “As life expectancy increases, we have to accept that you retire later, and we have to try to keep a sensibly fixed proportion of your life that you can expect to be in receipt of a pension.” If people can understand that principle—“This is the proportion of your life for which you will receive a state pension”—or if it is at least there for them to try to understand, that will be powerfully clear. Rather than suddenly saying, “Actually, we’ve got a big financial problem again; let’s make a change that no one was expecting,” let us set that within some kind of trend.

I welcome the Bill and look forward to it passing through this House. There are some questions about the detail that I am sure we will all want to understand, such as how precisely the calculations will be made, how people will know when they have been contracted out and where people who have been contracted out for part of their working lives will fall between £108 and £143. That will be difficult to understand, but it is important that the Government make that clear. There is clearly a huge role to play outside this place in making people understand what pension they will receive and what they can do about it, which will probably be more important than the debates we have in this place or the agonising over commas and full stops that is to come. I welcome the Bill and look forward to the chance to serve on the Public Bill Committee.

[Dame Anne Begg (Aberdeen South) (Lab)]

It is important that any pension reform has support in all parties across the House, because the last thing we want is for pension reform to keep changing every time a new Government come in. Up to now, the reforms introduced by the Labour Government in 1997 and later have not been changed by the present Government—I will talk about pension credit later. The proposals we are discussing in this Bill build on a number of those reforms, particularly auto-enrolment and changes to the occupational or second-tier part of a pension.

It is right that we should support the principle of this Bill. It is crucial that people know what pension they can expect from the state; I am glad that they will be able to expect a state pension in future. There has been a lot of debate in various media and elsewhere about whether future Governments will be able to sustain the whole principle of a single-tier pension or even the first tier of a state pension. I pay tribute to the Government for nailing the fact that this is what the future will hold. There will be an element that is not quite universal, because people will have to pay in, but everybody who has lived, worked and cared in the UK for more than 10 years—and up to 35 years—can expect a basic pension from the state, and everybody will know how much it will be.

There is a huge mismatch between what people expect on their retirement and what they are saving. The Scottish Widows report published the other week showed that most people want an income of around £25,000 in retirement, yet less than 20% of the population are saving at a level that would take them even remotely close to that. Even with the reform of the state pension and the introduction of auto-enrolment, people’s income in retirement will still not come close to the £25,000 that they might expect or aspire to. However, it will come a bit closer as a result of these reforms, because establishing a single-tier pension—a flat-rate pension—will make it easier for those giving advice to people saving for their retirement to say that it will always pay to save.

My right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) provided an example of where savings might not necessarily give someone a larger income in retirement, but the measures in this Bill will generally make it easier for those kind of calculations to take place and will make it easier and more understandable for people to realise just how much they are going to have to contribute to get an income that comes close to what they desire.

The introduction of the single-tier pension will also reduce means-testing, but only if the flat-rate pension is set above pension credit level. One of the Select Committee’s recommendations in our pre-legislative scrutiny report was that there should be clear blue water between the level of the single-tier pension and the pension credit—a bit more than the £1 and something that is there now. We had hoped that that principle would be built into the Bill and we are disappointed that the Government did not see their way to doing that. The principle is important —that the single-tier pension will always lift someone out of the basic means test.

Pension credit has come in for some criticism today, but at the time, it was absolutely the right thing to do, because the biggest issue that needed addressing in 1997 was that of pensioner poverty. Thanks to a level of success, the pension credit has managed to lift 2 million pensioners out of poverty. It means, too, that pensioners are not generally living in poverty; being old no longer equates to being poor. There are still people who are old and poor, but not in any different proportion than can be found in the general or working-age population.

[Ian Swales]

Does the hon. Lady regret the fact that two out of every five people who qualify for pension credit do not claim it, and does she welcome the measures in the Bill that will reduce the number of people who have to face the issue of means-testing?

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[Dame Anne Begg]

I welcome the reduction in means-testing, but the hon. Gentleman should be aware that there are two different types of pension credit. There is the savings credit, which the Bill is abolishing completely; that means that someone with savings but no other income might be worse off than someone who has no savings. The savings credit tended to be more complicated, and people found it difficult to judge whether or not they qualified for it. The people eligible for savings credit were generally those who had a little saved or were a bit above the minimum, but those people tended to believe that they did not qualify for anything because they had never qualified for anything before. The take-up among those who qualified for just the minimum income guarantee part of pension credit, on the other hand, was well over 90%. I do not want the hon. Gentleman to be confused over the fact that large numbers of people were not claiming what they were entitled to in pension credit. Very often, the savings credit might have qualified people for only about 50p a week, so they thought that it was not worth going through the bureaucracy. I know this from conversations I have had with my constituents.

The hon. Member for Amber Valley (Nigel Mills) mentioned that the Work and Pensions Committee undertook pre-legislative scrutiny, but we scrutinised only part 1 of the Bill. That was our remit. I shall say no more about the fact that the start date was accelerated, as I recall laying into the Minister for that when we last debated the issue on the Floor of the House. We took no evidence on the later parts of the Bill, the most controversial of which is probably the issue of raising the pension age. The many briefings I have received from various organisations have focused their criticisms mainly on that issue.

The impression has been created that, if there is to be a review every five years, the pension age will increase every five years, which has frightened quite a number of people, as it seems to underpin a never-ending increase in the pension age. That is why my hon. Friend the Member for Amber Valley—I call him my hon. Friend because he sits on our Select Committee—was wondering, given his present age, how old he will be before he receives any kind of state pension. I know how he might feel. I have said here before that as someone born in 1955, I have been hit by all the increases. I was of the generation of women who, under the Pensions Act 1995, would not receive a state pension until 65. I had accepted that and was planning for that, but the Government then introduced an acceleration up to 66 for 2020, so I can well understand why some women feel that they never seem able to reach their state pension age because the Government are continually moving the goalposts. That thinking may well be behind some of the anxieties expressed in many of the briefings I have received on the pension age provisions.

Other issues concerning not just the state pension but the pensions landscape are not covered in the Bill, even though the Select Committee produced reports on them. The hon. Member for Amber Valley mentioned that we published a report on the governance of pension schemes, in which we recommended that the Government should consider making a single regulator responsible for pensions. He has also set out some of the Select Committee’s concerns about the present regulatory framework, particularly regarding the gaps or confusion about exactly which body is responsible for which parts of the regulations.

Ultimately, pensions must be well regulated, because we have to rebuild trust in them so that people know that if they invest in a pension they will get a good income from it and not be ripped off by a pension company. They want to know that the charges they pay for their pensions are fair, that there are no hidden charges and that nothing pertaining to their pension has not been properly explained to them. It is really important for people to have that faith in the pensions industry and for the pensions industry to step up to the plate and ensure that it offers very good, well-regulated products that are not overly expensive.

We also produced a report about the lifting of restrictions on the National Employment Savings Trust. If the Government are to make sense of auto-enrolment and if indeed they are to get rid of what was the state second-tier pension in SERPS, or S2P, it is crucial that a state-backed second-tier pension is available, and that default option should always be NEST. In saying which restrictions should be lifted, we said only that the transfers in and out and the cap should be lifted; we did not say that the restriction on NEST always to have a public service duty should be lifted, as we thought that was absolutely right. There has to be a default scheme that cannot turn anyone away. If NEST is to undertake that important work, it will be unfair if some of the restrictions have not been lifted. I hope that, as the Bill goes through its stages here and in the other place, the Government will come up with some proposals to change the present restrictions that are hampering NEST’s ability to do business.

The Government have accepted some other elements of the Select Committee’s report. The implementation date is now in the Bill and it has also been specified that the minimum qualifying years should be no more than 10 years. It was the hon. Member for Amber Valley again who argued for exactly that, and we were happy to accept it as one of our recommendations.

During today’s debate, it has become clear that a good communications strategy is crucial. There is no doubt that when the single-tier pension was first mooted, everyone thought that those who were born on the day before the relevant date would receive £107 a week, while those who were born the day after would receive £144. I think that people still have that impression, and that it is still felt that the new system will be more generous to everyone. Well, it will be more generous to some—the self-employed will probably do slightly better out of it—but those who have assumed that all their second tier of pension will be covered by the state earnings-related pension scheme or by the state second pension may be worse off in the long term.

It is incumbent on the Government to try to deal with some of those misunderstandings. I assume that they have sent a letter to every woman who is within 10 years of pension age, because I received such a letter, but the letter that I received was very vague, and—as has already been pointed out today—not everyone knows how many years of credit they have in their state pension, because not everyone understands what work qualifies for credit and what work does not.

It is crucial for us to warn people who are close to retirement that they must have made national insurance contributions for 35 years rather than 30. Some have already retired under the misapprehension that they have contributed the full amount. It must be made clear to them that they can buy back national insurance years, they must be told how they can do that, and it must be ensured that they do not buy back years that will give them no extra income.

[David Mowat (Warrington South) (Con)]

I have been reflecting on what the hon. Lady said about the National Employment Savings Trust. It is clear that NEST is directionally right and that a passive, low-cost investment vehicle is needed, but there are a great many restrictions that will prevent it from competing fairly with the existing industry in the marketplace. Did the Select Committee give any thought to what could be done about some of those restrictions?

[Dame Anne Begg]

We did indeed. We did not consider it during our pre-legislative scrutiny, because the issue is not covered by the Bill—there is some regret about that—but we did consider it in our governance report. We also published a separate report recommending the lifting of the cap on NEST and the removal of restrictions on transfers in and out of it. If the Government’s “pot follows member” proposal—which is in the Bill—is to work, the restriction on transfers must go, because otherwise anyone who has or is about to have savings in NEST will not be able to be followed by their pension pot when they move from one employer to another.

[David Mowat]

The “pot follows member” proposal interests me as well. Did the Select Committee give any thought to the use of NEST as a vehicle for aggregation? That strikes me as a natural way of going down a different route.

[Dame Anne Begg]

We did indeed. In fact, that was the favoured option of many of our witnesses. The Government did not listen, and opted for “pot follows member”, but we, and a number of witnesses, thought that NEST would be ideal as the source of an aggregated fund.

The communications strategy must also make it clear that savings credit will end when the single-tier pension is introduced. However, one of the main issues dealt with by the Select Committee was the issue of women—for it is usually women who are affected—who currently depend on the pension contributions of a partner or husband and whose pensions are therefore based on derived rights, because that system will end. The Committee recommended that women within 10 years of pension age should continue to enjoy those rights, because in less than 10 years they would not have time to build up a contribution record that would enable them to receive any kind of state pension in their own right. That, we thought, was very unfair, given that all the household planning might depend on the assumption that the wife would receive 60% of the husband’s basic pension.

[Jackie Doyle-Price (Thurrock) (Con)]

I share the hon. Lady’s concern. In their retirement, a group of people who have depended entirely on a single income and have not imposed any burden on the taxpayer are now being robbed of what they had every legitimate expectation of receiving.

[Dame Anne Begg]

Indeed. We talk a great deal about how women’s lives have changed. Younger women may have built up contributions in their own right, either through caring responsibilities or through their own work, but there is a generation of women who may not have retired or reached pension age, who have stayed at home throughout their lives, and who expected at least to receive that 60%, although they did not expect more.

I accept that, ultimately, that system should probably end, but I think it unfair to take the 60% away from people who are too close to pension age to build up contributions in their own right. I also accept what the Government have said about people who do not live in the United Kingdom, but some of those affected will be living here, and that group may include a number of people who have been in work but have not qualified for national insurance credits, because their income has been too low to register, or because they have had a number of very small jobs and have therefore not made NI contributions that would have covered those years.

We have already discussed the group of women who were born between April 1951 and 1953. Some of their fears have been allayed—I think they initially believed that they would suffer a major change in their pension income—but some issues still need to be addressed, partly through the communications strategy. The Government must deal with that group first, and give them the information that they need.

There will be cliff edges, as there are bound to be when any change is made, and there may be some groups whose cliff edges will be worse than the one facing that group of women, although we have not spotted them yet. I hope that those who give evidence in Committee will make the Government aware of any other cliff edges, because the last thing we want is to discover in April 2016 that there are unexpected problems affecting certain groups. There will also be a great deal of complexity in the new system. Nothing will be simple, particularly the migration from the old system to the new system and the calculation of accrued rights. That was never going to be easy, which may be why it has taken the Government so long to come up with a solution.

We know that in the long term the Government will be spending less money. There obviously cannot be more winners than losers overall, because the pensions bill will be lower in 30 years’ time—which, I suspect, is why the Government managed to get the legislation past the Treasury. I hope that that will make the situation more sustainable, but I believe that this will be an election issue in years to come. The level at which the single-tier pension is set will be in the gift of Governments, and it will be up to them to decide whether to increase it or not.

However, overall the Bill is to be welcomed. It is the right step in the right direction, and it will build on the good work that is already being undertaken. It is also important that people realise that the subject of pensions affects not just those of pensionable age, but everyone, and especially those of working age, because if they do not start making provision for their pensionable age now, they will find that they do not have enough money to be able to have the quality of life they expect in retirement.

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[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I have followed this debate closely and it is important to say from the outset that simplification of the state pension system is an entirely laudable aim and that I think there is a great deal of consensus throughout the House on the move towards a more inclusive pension system.

It is also important to appreciate, however, that our starting point is one of the lowest levels of state pension provision anywhere in Europe. We have relatively high levels of pensioner poverty and pensions have consistently fallen behind and failed to keep pace with earnings over a number of decades. We also still have deep and persistent inequality not just between women and men, as has been mentioned, but between those who have occupational pensions and those who have not. Far too many people who worked very hard throughout their working lives still end up living on the breadline in later life. Meanwhile, the challenges of an ageing population and increasing life expectancy drive the need for reform.

I have talked in the House a number of times about the dramatic social and geographic disparities in life expectancy and healthy life expectancy, and I do not plan to rehearse those arguments again this evening. The bottom line, of course, is that we need pensions that are affordable and sustainable and fair to pensioners. Our pension system also has to provide us with long-term stability and security. When people look decades ahead, they need to know what they are likely to get back and that the sands will not shift every time we play musical chairs in the House of Commons.

In his opening remarks the Secretary of State made much of his so-called triple lock, but those of us who saw the Financial Times this morning could be forgiven for thinking that the pensions Minister has let the cat out of the bag by acknowledging that the triple lock is a short-term fix and that there is no certainty that it will continue beyond the life of this Parliament or that the value of the single-tier pension will keep pace in the longer term, given that all the modelling that has been done is predicated on the triple-lock guarantee.

Although today’s debate has focused heavily on those people who will gain in the short term—some certainly will gain in the short term, particularly, as has been said, the self-employed and those receiving a pension for the first time—there will be losers as well as winners in the transition. It is extremely difficult to work out which are which, because the side of the line on which an individual will fall depends on a wide range of factors, including how long they live after retirement, which few are able to predict.

We have heard a lot less this afternoon about the longer-term impact of the scheme, yet most commentators agree that it is less generous than that which it replaces and that many people, including most of those born since 1970, will lose out. The most positive claim that has been made for the single-tier pension is that it is undoubtedly less complex than the scheme it replaces, but if the new scheme has the virtue of simplicity, the transition process certainly does not.

Last week, the Association of Consulting Actuaries, the National Association of Pension Funds and the Association of Pension Lawyers briefed the all-party group on pensions at a meeting chaired by the hon. Member for Gloucester (Richard Graham). One of their chief concerns was the complexity of the transition process and, in particular, the extremely tight time scales within which the Government are seeking to enact the Bill and its attendant regulations. Establishing the foundational amount for everyone with a national insurance contribution record who has not retired by 6 April 2016 will be a huge and challenging project in itself, and there are real concerns about how the end of contracting out will be managed within the proposed time scale.

[Dame Anne Begg]

I am interested in the hon. Lady’s comments on the complexity of the transition. Will she clarify for those us who live in Scotland what that complexity would mean for the SNP’s plans for the state pension, should there be a vote for independence?

[Dr Whiteford]

The most important point I can make in response to the hon. Lady is that Scotland is spending a lower proportion of its GDP on social protection than the UK as a whole, and that has been the case for every one of the past five years. Moreover—I have made this point several times in the House—Scotland has lower life expectancy by almost two years, and that is not simply a geographical disparity; it goes across every social class. To my mind that means that we have to look at tailored solutions for Scotland and understand that the scheme will not result in equal benefits for people who are likely to live two years less than the average in the UK.

[Dame Anne Begg]

The hon. Lady said that it would be complex to find out people’s national insurance contributions in the UK, but surely it would be even more complex for Scotland to negotiate that as an independent country. Does she envisage that happening easily?

[Dr Whiteford]

I do not think that that is beyond the wit of Members in this Chamber or those in Holyrood. We have a lot of able people who will be able to do that. In fact, as we move into a new system, actuaries and pension fund managers are raising pragmatic questions about how the change will be managed. A new, simpler system will be significantly easier to unravel and manage than the current one, which is why I have said that I welcome the general direction of travel.

On the fundamental issue of uncertainty, the key thing arising from the pensions Minister’s intervention in this morning’s Financial Times is that there is no certainty. We do not know how the modelling will play out or what our decisions will mean for the future.