State Pension Reform

Anne Begg Excerpts

Monday 4th April 2011 Commons Chamber

[Steve Webb]

I am grateful to my hon. Friend, who brings his great knowledge of these issues to the House and to the Select Committee of which he is a member. As he says, we need a simpler system. He will appreciate that these things take time; we will need to consult and then respond. In due course, we hope to legislate to re-programme the computers and so forth. As the Chancellor said, we are talking about some years to implement the reforms, but we are clearly keen to move forward as fast as we possibly can.

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

I was listening hard to the Minister’s reply to the shadow Minister, my hon. Friend the Member for Leeds West (Rachel Reeves), and I noticed that he provided no examples, in response to her request, of those who would be worse off as a result of these changes. There must be some losers. Presumably, they will include the group who enjoy pension credit now, but have not paid enough contributions to justify the new flat-rate pension. What will happen to that group? As for women, surely if they have not made the contributions, they will not be any better off than they are now.

[Steve Webb]

I am grateful to the Select Committee Chair for her questions. To be clear on the role of pension credit, we envisage that there will have to be a safety net under any system, and the Green Paper provides for consultation about what exactly that might look like. There will still be a guaranteed credit type system—a floor below which people cannot fall. In a single-tier pension world, the savings credit would no longer be necessary for new pensioners. In other words, the savings credit was invented by the previous Government to deal with the fact that 100% marginal tax rates were paid on any saving. Because we are not doing that any more, we will not need the savings credit for new pensioners, which helps to pay for the reform. It is less means-testing, more universal pension.

The hon. Lady rightly mentions the position of women and my point is that women under the current system, who often did their child rearing before the state second pension was introduced, have no protection at all, whereas they have basic pension protection. Under a single-tier world, they get protection at the full rate, so they will benefit from the reforms we are introducing.