State Pension (Amendment) Regulations 2016

Baroness Altmann Excerpts

Wednesday 24th February 2016 Lords Chamber

Moved by

[Baroness Altmann]

That the draft regulations and draft order laid before the House on 18 and 25 January be approved.

Considered in Grand Committee on 22 February.

Motions agreed.

State Pension (Amendment) Regulations 2016

Baroness Altmann Excerpts

Monday 22nd February 2016 Grand Committee

Moved by

[Baroness Altmann]

That the Grand Committee do consider the draft State Pension (Amendment) Regulations 2016

[The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)]

My Lords, I shall speak also to the draft Social Security Benefits Up-rating Order 2016. In my view, the provisions in the order and the regulations are compatible with the European Convention on Human Rights. Together, these statutory instruments demonstrate the Government’s continuing commitment to support those who have worked hard all their lives, paid into the system and done the right thing to provide them with dignity and security in old age.

Let me first address the issue of those social security rates which are linked to the rise in prices. This includes the additional elements of the current state pension, working-age benefits, carer’s benefits and benefits which contribute to the extra costs that may arise as the result of a disability or health condition.

Last year, the relevant headline rate of inflation, the September consumer prices index, stood at -0.1%, which means that price-indexed benefits have retained their value in relation to the general level of prices. These benefit rates will therefore remain unchanged for 2016-17 and have not been included in the uprating order this year. For the same reason, the Government have not laid a draft guaranteed minimum pensions increase order.

I add that the Government intend to bring forward additional secondary legislation to adjust rates and thresholds within certain social security benefits that would usually be covered by an uprating order. These include adjustments to pensioner premiums within working-age benefits, pensioner amounts in housing benefit, the level of savings credit and non-dependent deductions. We will be laying these regulations, which will be subject to the negative procedure, before Parliament in due course.

As for those rates that are included in the uprating order, this Government continue to stand by their commitment to the triple-lock guarantee, by which the current basic state pension is uprated by the highest of earnings, prices or 2.5%. This year, the increase in average earnings has been 2.9%, more than inflation and more than 2.5%. This means that from April 2016 the rate of the basic state pension for a single person will increase by 2.9%—that is, £3.35, to £119.30 a week, the biggest real-terms increase of the basic state pension since 2001. Therefore, from April 2016 the full basic state pension will be more than £1,100 a year higher in 2016-17 compared to the start of the previous Parliament. We estimate that the basic state pension will be around 18.1% of average earnings, one of its highest levels relative to earnings for more than two decades and in contrast to the low of 15.8% which it reached in 2008-09.

This Government continue to protect the poorest pensioners. The pension credit standard minimum guarantee, the means-tested threshold below which pensioner income need not fall, will rise in line with average earnings at 2.9%, so that from April the single person threshold of this safety-net benefit will rise by £4.40 to £155.60 a week and will be the biggest real-terms increase since its introduction. Pensioner poverty now stands at one of its lowest rates since comparable records began. Despite the difficult economic decisions that we have had to take, I am pleased to say that this Government are spending an extra £2.1 billion in 2016-17 on supporting pensioners who have worked hard and done the right thing while continuing to protect the poorest pensioners.

The state pension regulations set the new state pension full rate that will apply from April 2016 at £155.65 per week, equivalent to more than £8,000 per year. This will mean that the new state pension will therefore stand at 23.6% of average earnings, and I am pleased to confirm that the triple lock will apply to this full rate for the remainder of this Parliament. Our reforms will see the complicated state pension system become clearer and fairer, providing a solid foundation on which people can build up their retirement savings. They will lift many more pensioner incomes above the basic means-tested threshold for the pension credit standard minimum guarantee.

The new state pension will see many groups better off than they would be on the current system. Around 650,000 women who reach state pension age in the first 10 years can expect to receive, on average, more than £400 a year more than under the current system. Around three-quarters of those reaching state pension age will be better off under the new system by 2030. Carers, lower-earners and self-employed people will also benefit under the reformed system. However, we are ensuring that the reforms in the new state pension cost no more than the present system.

In conclusion, these measures demonstrate the Government’s overall commitment to support current pensioners by increasing their basic state pension through the triple lock, to protect the poorest pensioners by raising their guaranteed minimum income and to reform the state pension system so that it is clearer and fairer for future pensioners. Despite the tough and difficult decisions we have had to take, the Government are rewarding pensioners who have worked hard by providing them with a secure and dignified retirement. On that basis, I beg to move.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Baroness, Lady Altmann, for her explanation of these regulations and the uprating order. I thank the Minister also for the follow-up communication dealing with some outstanding points from earlier regulations and note the efforts to be made to publicise the availability of national insurance credits for spouses and civil partners who accompany Armed Forces personnel on overseas postings.

As we have heard, the regulations set the full rate of the new state pension at £155.65. I will say more about this later. The uprating order covers the obligation under Section 150A of the Social Security Administration Act 1992 for the Secretary of State to review certain benefits and uprate by reference to earnings if they do not maintain their value. We are advised that the annual growth in average weekly earnings for the quarter ending in July 2015 was 2.9%. This is therefore applied to relevant benefits.

As far as Section 150 of that Act is concerned, we are advised that the uprating order does not need to include any benefits because these benefits have maintained their value in relation to prices, given that the CPI for the 12-month period ending in September 2015—which was available from mid-October, I think—showed a marginal negative growth rate. This seems to overlap with the benefits freeze in the Welfare Reform and Work Bill, a freeze that extended for four years the previously announced two-year restriction on certain working-age benefits. The Minister will be able to confirm that not all the benefits that are not uprated in this order have been the subject of the freeze provided for in the Bill. These include—I think the Minister referred to them—attendance allowance, carer’s allowance, DLA, ESA, statutory adoption pay, statutory maternity pay, statutory paternity pay, and PIP.

When we discussed these matters the Government made much of certain disability benefits being outside the freeze. The briefing note provided to us when we were considering the Bill—at a time when the CPI rate must have been known—nevertheless stated:

“To continue to ensure we protect the most vulnerable we are exempting benefits for pensioners, benefits relating to the additional costs of disability and care and statutory payments”.

In the event, many pensioner and disability costs are not to be uprated, for 2016-17 at least. Can the Minister tell us what assessment has been made of the appropriateness of using CPI as a measure of the additional costs incurred by those with a disability, so that the Government can be satisfied that the vulnerable are being protected?

--- Later in debate ---

Finally, I turn briefly to WASPI. This issue, although not directly related to the uprating, is overshadowing the pensions scene, including the introduction of the new state pension. The Government will be feeling the heat from the campaign and should be seized of the sense of injustice felt by those women who judge that they were given inadequate notice of the changes to their state pension age and their deferred access to the new state pension. It would appear that this matter is simply not going to go away—as I am sure the Minister saw, there was another article in the Sunday Times just yesterday. I think we know her original view, and I hope that in government she will become a voice for addressing this injustice. A theme running throughout these issues is the importance of effective communication. We know that pensions can be complicated—and transitional arrangements particularly so—but on this score the Government are still failing.

[Baroness Altmann]

My Lords, I thank the noble Lord, Lord McKenzie, for his observations, and I would like to help set some of the record straight or clear up any confusion. He asked about what he called a “freeze”. The fact that some of the benefits are not changing is purely a reflection of the fact that they are linked to prices and prices fell. I assure him that uprating will continue as inflation picks up, so that these benefits will continue to increase in line with any rise in prices in the coming years. This is not a freeze on these particular benefits.

[Lord McKenzie of Luton]

It is not a freeze on these particular benefits, but they are not being uprated. How would the Minister describe that? That is the first point. On the perhaps more substantive point, which I recognise does not include the specific freeze in the Bill, what judgment have the Government made about the impact of not uprating and the extent to which CPI is relevant to the extra costs of those who claim DLA or PIP, not the generality of benefits?

[Baroness Altmann]

As I have said, benefits such as PIP, DLA and attendance allowance will be uprated in future years, when there is inflation, but prices have fallen over the past year. I can confirm, by the way, that SERPS, S2P and the other benefits are included in this. The official measure of inflation is CPI, and that is the measure required to be used for uprating benefits. CPI fell last year, so there is a 0.1% real-terms increase in these benefits, and as and when inflation increases in the future, these benefits will be increased to take account of the rise in prices, as is required. Earnings-linked benefits will rise in line with earnings or the triple lock, depending on the requirements of the benefit.

[Lord McKenzie of Luton]

I am sorry; I do not intend to get up again, unless really provoked. I think the Minister said that the benefits had to be uprated in line with CPI. If the Government judged that to be an insufficient uprating—zero, in this case—because of what had happened to the costs of those concerned, is she saying that the Government would be precluded from uprating further or beyond the zero? Are they bound by that?

[Baroness Altmann]

As the noble Lord is aware, the Government would have discretion to increase by more, but the judgment is that the appropriate requirement this year is that these benefits be changed in line with inflation, or slightly above the movement in prices over the past year. I reiterate that this is not a freeze. It is not part of any benefits freeze; it is purely a function of the fact that these particular benefits rise in line with the change in the price level, as measured by CPI, which is the Government’s official inflation measure. On his particular question, Section 150A of the Social Security Administration Act does not allow for inclusion of these rates in the order, so the rates that will be increased will be taken by alternative powers. There is nothing untoward or underhand in any way; it is merely a function of how the legislation is framed.

Turning to the new state pension, the noble Lord is absolutely correct: communication is very important. One of the big communication challenges we all face is the perception that if people are not getting what is called the full rate of the new state pension, they are losing out. That is a misperception, and it is important that we try to help correct and overcome that. It is important that we help people understand that the new state pension is a totally new system. The full rate will apply to those who are only in the new system, but for those who have built up state pension under the previous system—the existing system—an allowance will be made for years in which they did not pay full national insurance because they were building up a private pension with some of the rebate for national insurance they received.

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[Lord McKenzie of Luton]

Will the Minister tell me what happens after 2030? What are the projections?

[Baroness Altmann]

I am coming on to that because it is important to understand that these reforms are designed to make the state pension system affordable and sustainable over the long term. We have an ageing population and an increasing number of expected future pensioners, which is good news. The proposal and the overall framework of our pension reforms, taken together, are to ensure that the state pension system is sustainable. Over the years from 2030 and certainly from the 2040s onwards, the general level of the state pension will be set at a base of around £8,000 a year in today’s money. On top of that, people will be expected to have built up a private pension under the auto-enrolment reforms. It is true that in the 2030s and mainly from the 2040s onwards, the general level of the state pension will not be as generous as it would have been if the current system had been sustained. However, the current system is not sustainable. That is expected to be combined with a better private pension to ensure adequate pension provision—indeed, better pension provision—for more pensioners in future because the state pension system will not penalise private savings in the way it currently does for those who are going to end up in the bottom half of the pensioner income distribution in later life.

The new framework, with a base level of state pension that is not earnings-linked, topped up by a good private pension that comes from auto-enrolment, with help from the employer, which will be earnings-linked, is meant to make our system more sustainable and affordable. Having said that, as the noble Lord rightly said, there will be people who will need a safety net; for example, because they do not have the full 10 years required for any state pension and so end up with no state pension, or for other reasons. They will still have access to the means-tested pension credit, but that will be set below the full rate of the new state pension to maintain the incentive.

The question about the 5p differential between the pension credit minimum guarantee and the full rate of the new state pension was relevant to this point. We are committed to ensuring that the new state pension is above the pension credit standard minimum guarantee, but it is also important to remember that the 2012-13 illustrative rate for the new state pension was £144 a week, while the pension credit standard minimum guarantee for a single person was expected to be £142.70 a week. Since then, we have increased the pension credit standard minimum guarantee by the full cash increase given to the basic state pension, so that the poorest pensioners benefit from the triple lock as well. That means that the pension credit standard minimum guarantee has grown faster than the new state pension illustrative rate.

As far as the savings credit is concerned, it is true that the savings credit maximum rate is being reduced, but this should be more than offset by the increase in the basic state pension, and the triple lock. As well as being catered for, depending on what happens to each individual element of a pensioner’s income, the fact that the maximum savings credit is falling by approximately £2 a week will be more than offset by the £4 or £3.35 increase. Our forecasts are that pensioners will, on average, still be £2 a week better off in cash terms. I am assured that there will be absolutely no cash losers from this. The expectation is that the poorest pensioners will still see an increase in their overall income.

The noble Lord also asked about the rebate savings from contracting out. It is true that the additional national insurance revenue raised by the withdrawal of the contracting-out rebate will be received by the Government. However, it will be received by the Treasury; it will not flow to the DWP. It is not expected to be spent on the state pension; otherwise, it would mean that significantly more would be spent on new, rather than existing, pensioners, which was never the intention of these reforms. It is a matter for the Treasury how it allocates the departmental funds that it raises after the removal of the rebate and how that revenue is subsequently spent.

I think that that covers the points raised, if I am not mistaken.

[Lord McKenzie of Luton]

I am grateful to the Minister for a very full response on most issues. Unless I missed it, I do not think she dealt with those who may have no entitlement to the equivalent of the basic state pension, or with transitional protection. We touched on those paying reduced national insurance contributions before 1977, which might be one category, but is that it? Is that all the transitional protection that will be available?

[Baroness Altmann]

I apologise. I thought that the noble Lord had, in a way, answered his own question by saying that there is transitional protection for those women who have paid the married women’s stamp—the reduced rate election. There is also protection for Armed Forces spouses, who will get credits in the system. It is also the case that some people might have inherited a pension from a spouse but no longer will under the new system because the new state pension will treat individuals in their own right. It is very difficult for us to predict who will become widowed. However, as the noble Lord rightly said, this will form an important part of the communications on the new state pension: to explain that in future most people—as I say, there will be exceptions for the Armed Forces and the married women’s stamp—will be treated for state pension purposes on the basis of their own record, rather than being assumed to be able to inherit or transport an entitlement from a partner.

[Lord McKenzie of Luton]

Just to be clear on that point, my understanding is that the Government have estimated that up to 2030 some 290,000 people will be affected by the withdrawal of that opportunity. I understand what the Minister has said about those who paid reduced national insurance contributions before 1977 and those accompanying armed services personnel, but how many of those 290,000 people does that cater for? What is the level of the transitional protection likely to be for those who paid reduced national insurance contributions before 1977?

[Baroness Altmann]

I do not have the breakdown, but I am happy to write to the noble Lord with whatever figures we can give him to satisfy him on that particular request. Pension credit remains for anybody who does not have sufficient income to bring them up to the £155.60, which is usually far more than the pension that one would have inherited. Under the new state pension, widows or widowers will also inherit the protected payment that their previous partners would have been able to build up under the new state pension system rules.

I thank the noble Lord for his contribution to this important debate. This Government are taking the necessary steps to protect pensioners, many of whom have worked hard all their lives and are no longer in a position to increase their income through work. Our triple lock, our protections for the poorest pensioners and our new state pension reforms mean that we will be able to provide pensioners with dignity and security in their retirement.

Motion agreed.

Social Security Benefits Up-rating Order 2016

Baroness Altmann Excerpts

Monday 22nd February 2016 Grand Committee

Moved by

[Baroness Altmann]

That the Grand Committee do consider the draft Social Security Benefits Up-rating Order 2016

Motion agreed.

Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016

Baroness Altmann Excerpts

Thursday 11th February 2016 Lords Chamber

Moved by

[Baroness Altmann]

That the draft Order and Regulations laid before the House on 30 November 2015 be approved.

Relevant documents: 12th Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 8 February

Motions agreed.

State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016

Baroness Altmann Excerpts

Monday 8th February 2016 Grand Committee

Moved by

[Baroness Altmann]

That the Grand Committee do consider the State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments

Motion agreed.

Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016

Baroness Altmann Excerpts

Monday 8th February 2016 Grand Committee

Moved by

[Baroness Altmann]

That the Grand Committee do consider the Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments

[The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)]

My Lords, I beg to move that the Grand Committee considers the State Pension and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2016 and the Pensions Act 2014 (Consequential and Supplementary Amendments) Order 2016. As the regulations and order both make provisions relating to the new state pension, it seems sensible that they should be discussed together. I confirm that the statutory instruments are compatible with the European Convention on Human Rights.

I propose to speak in most detail about the regulations. In summary, they enable a widowed person whose late partner was in the old state pension scheme to inherit graduated retirement benefit. They modify the rules for calculating a deferred increase, so that the payment accurately reflects the amount of new state pension the person had deferred. They maintain the long-standing policy of not uprating the state pension for people resident in certain countries overseas. Lastly, they insert a provision relating to survivor benefits that was in a previous set of regulations into the new set that replaces them.

Regulation 3 is a technical provision which relates to the calculation of the weekly pension increase for a person who defers their new state pension. The standard calculation method is set out in the Pensions Act 2014. It provides for the increment for each week in the deferral period to be based on the rate of pension that would have been in payment at the end of the deferral period, if the person had not been deferring. This allows the pension increase to reflect any annual upratings that would have been awarded in that period.

The provision made by Regulation 3 modifies that calculation to cater for what will be the relatively rare situation of a change in the weekly rate while a person is deferring for a reason other than uprating. The most likely reason for a non-uprating change would be where a person is widowed and becomes entitled to an inherited amount under the transitional arrangements. The modification is needed to ensure that the increase is based only on the rate of pension applicable at each stage of the deferral period rather than the rate at the end of the period.

Regulation 4 inserts a new Part 6 into the State Pension Regulations 2015, which will provide for a widowed person who reaches state pension age after 6 April 2016 to inherit graduated retirement benefit. These provisions correspond to the transitional arrangements set out in the Pensions Act 2014, which enable a person whose deceased spouse or civil partner was in the old state pension to inherit SERPS or state second pension in line with the pre-2016 rules. The survivor will be able to inherit half the deceased person’s graduated retirement benefit—the same as they would have inherited under the pre-2016 rules. This is provided that the same conditions are met as would have applied in the old system and the marriage or civil partnership existed before 6 April 2016.

Although the great majority of people in the old scheme have accrued some graduated retirement benefit, the amounts involved are small. As a result, we estimate that, on average, widows would inherit around £2.50 a week and widowers less than £1 a week under these provisions. They are therefore principally about maintaining consistency between the way we treat graduated retirement benefit—which was, of course, the first earnings-related state pension—and the rules for inheriting SERPS and state second pension.

The provisions introduced by Regulation 4 also enable the survivor of a pensioner who deferred their old state pension to inherit a weekly pension increase or, if applicable, a lump sum payment based on the deferred graduated retirement benefit. Again, these mirror equivalent provisions in the Pensions Act 2014 that protect the existing inheritance arrangements for the survivors of people who deferred an old state pension.

Regulation 6 is also a minor technical provision and inserts a new Regulation 27A into the Occupational Pension Schemes (Schemes that were Contracted-out) (No.2) Regulations 2015. The 2015 regulations replace the current 1996 contracting-out regulations. It was decided to replace the whole of these regulations to deal with the requirements necessary for the end of contracting-out, rather than simply amend the 1996 regulations. The aim was to produce a coherent set of new regulations for the end of contracting-out to assist the reader.

In fact, Regulation 27A replaces Regulation 69B of the 1996 regulations without amendment. It requires a scheme converting guaranteed minimum pension, or GMP, into scheme benefits to provide a survivor’s benefit in the same circumstances as a survivor’s GMP. However, new Regulation 27A requires the affirmative procedure and therefore needs to be debated before it is made, so it is inserted by this instrument.

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[Baroness Altmann]

My Lords, I am grateful to the noble Lord for his contribution to this technical debate. He has raised several questions, and I will attempt to answer some of them. If he requires further answers, I will of course write to him.

It is indeed the case that the analysis conducted by the department shows that the majority of those reaching state pension age between now and 2013 will receive more from the new state pension than they would have done under the old system. In the long run, the aim is that the rollout of automatic enrolment will provide a supplement to that state pension for future generations of retirees. Therefore, in the long run, the overall amount paid out by the state may reduce, but that is to be offset by the impact of automatic enrolment.

Women will get more state pension, on average, under the new system than they would have done under the old one. Notwithstanding the equalising of state pension ages, over their lifetime women will on average get 10% more state pension in total than men of the same age. The idea that women are losing out needs to be modified by some of the data that we have already produced.

[Lord McKenzie of Luton]

I was not suggesting that women were going to lose out. My point was that there is movement towards equalisation with men, although that is some time in the distance—I think that the 2040s has been the calculation.

[Baroness Altmann]

The equalisation between men and women of state pension payments may come in the future but, in the mean time, notwithstanding whether they get slightly less than men—the gender gap will be much narrower—over their lifetime they will get more, because the average woman lives longer than the average man. Once equalisation occurs, the gender favour to women will be even greater. In the mean time, the new state pension will put women in a much stronger position under the new state pension rules relative to the old ones. This is a significant improvement in the position of state pension payments for women on average, who, as we all know, have lost out in the past; we are remedying that to a large degree.

The noble Lord asked about contracting out. The idea of removing contracting out is not so much about cash flow or increasing the amount of money that comes to the state, because contracting out merely replaces what the state would have otherwise paid out in the state pension. By ending contracting out, the national insurance payments that are increasing will be offset over the long run. Indeed, depending on the average life expectancy, it could perhaps end up meaning that the Government pay out more in state pension as a consequence of ending contracting out than they do under the current system, where part of the state pension is contracted out to an employer who promises to replace the additional state pensions.

Therefore, it is not clear to me that there is a cost saving. It is clear to me that it is absolutely essential that we move to a simpler state pension system, which people can understand and deal with, because currently they cannot do so. At present, the existence of contracting out means that part of people’s state pension builds up in a private pension, which confuses the messages and the planning. Therefore, the principle of the new state pension is that everybody pays the same type of national insurance without some people being able to pay less than others because they are in a particular type of private pension scheme, and that everybody, regardless of their earnings, the type of credit they have or the type of national insurance contribution they pay, will be able to build up the same state pension each year as they accrue another year on their contracting-out record.

[Lord McKenzie of Luton]

In relation to the year we are just about to enter—2016-17—is the Minister saying that there will not be extra net revenue in the system that year from the abolition of contracting out?

[Baroness Altmann]

Of course that is not what I am saying. I am saying that we have to look at the state pension over the long term. National insurance is paid now but it relates to liabilities that will be paid over a long period of time, and Governments, quite rightly, have to plan for that with regard to the money flowing in now and the liabilities that will ensue from that over the longer term. As we know, the new state pension is expected to be cost-neutral to the taxpayer. Given that, I am not convinced that it is appropriate to consider contracting out as a money-saving exercise.

I am delighted that the noble Lord supports Regulations 4 and 5. Most of the measures that are being put in place here are indeed technical in nature and try to maintain the principles of the new state pension as well as protect people when we move from the old system into the new system—in particular, as we said, widows or widowers who inherit parts of the state pension entitlements that they would be able to inherit today.

The noble Lord also mentioned the importance of communications, and I completely agree with that sentiment. Indeed, as he alluded to, we are engaged in a widespread campaign to inform people and improve communications around state pensions. An enormous amount of time, effort and money has been put into this exercise, and we will continue that over the coming period. I assure the noble Lord that we have very much adopted the idea of communications being particularly important and will continue to work in that way.

The noble Lord also mentioned the complexity of the new state pension rules and some of the issues that have arisen with the drafting of the regulations. Of course it is a matter of regret that we had to come back with an affirmative regulation, which should have been done in the appropriate way in the first place. However, the debate is now taking place, as required.

We must not forget that the old state pension is what is so complicated. Dealing with past complexity is imposing difficulties when moving to a new state pension system. We have not been able to just sweep away the old system; we have to carry people into the new state pension system. That means carrying with it the complex rules and the many adjustments that were made over the many years for which it has existed. Once that new system is in place, the scale of complexity will be vastly reduced. For most people, it really will be a simple system, but we have to get from the old system into the new one, when it is fully up and running, and that will take some time before we can reconcile all the records as at April 2016 to know what everyone is starting the new system with.

As for national insurance credits for spouses and partners of people in the Armed Forces, we will be providing data when we bring forward those regulations. As the noble Lord said, we plan to have that debate on 22 February. We believe that we have reliable data that we can put before the House. Unfortunately, as I explained, the old system is very complicated. We need to bring in a huge number of moving parts from the current system to try to ensure that people do not lose out.

The noble Lord mentioned inheritance. In the new state pension system, widows will be able to inherit the additional pensions of their late spouses or partners. That inheritance currently exists and will be carried forward. I can reassure the noble Lord on that matter.

The noble Lord asked me about digital state pension statements. At the moment, they are in testing. The testing will be carried out over the next few weeks, and we will then be gradually rolling out the new digital statements, which will be much clearer and more helpful, so that people can see forecasts of what their new state pension will be able to give them.

As for the issue of deferral, as I said, the regulations will correct an anomaly that exists. The new state pension will ensure that the deferral for those who live in overseas countries which do not have a reciprocal arrangement with us, and those countries in which pensions are not uprated at the moment, will apply only to the pension at the date at which the person reached state pension age. That is the increment that will be added for deferral, rather than adding an increment to an increased state pension, which would otherwise give them a double benefit.

The debate has ranged rather widely—probably more widely than the provisions—so it may be helpful if I remind the Committee of what the regulations do. They enable a widowed person whose late partner was in the old state pension scheme to inherit the graduated retirement benefit. They provide for increments from state pension deferral to be based on the amount of new state pension the person would actually have been entitled to if they had been receiving their pension instead of deferring it. They maintain the long-standing policy of not uprating the state pension for people resident in certain countries overseas. They replicate a provision relating to survivor benefits that was in an old set of regulations in the new set that replaces them. The order simply makes consequential amendments that result from the introduction of the new state pension. I therefore commend the regulations and the order to the Grand Committee.

[Lord McKenzie of Luton]

Would the Minister mind looking at the record after this and perhaps writing where she has not been able to cover matters this afternoon?

[Baroness Altmann]

Yes. As I said, I am more than happy, if there are issues that have not been covered, to write to the noble Lord.

Motion agreed.

Family Test

Baroness Altmann Excerpts

Tuesday 26th January 2016 Lords Chamber

[Baroness Lister of Burtersett]

To ask Her Majesty’s Government what impact the Family Test has had on policy-making.

[The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)]

My Lords, the family test is an integral part of the policy-making process. There is a cross-government commitment to embed the family test in all domestic policy considerations. The Department for Work and Pensions has established a dedicated team to support government departments and ensure that the family test is applied in a meaningful way.

[Baroness Lister of Burtersett (Lab)]

My Lords, the DWP recommends, in its guidance to other departments on the family test, that they consider publication of any assessment. However, it has rejected calls from family organisations and faith groups that it should do so itself on the policy in the Welfare Reform and Work Bill to limit financial support to two children. Could the Minister explain why? Will she commit to routine publication in future, in the interests of transparency and of the explicit family perspective on policy-making that we were promised?

[Baroness Altmann]

My Lords, the family test is included in and incorporated into advice to Ministers on new policy. It is not a pass or fail exercise; it is about helping to make informed decisions about how to support strong and stable families. It is much broader than a tick-box exercise, which seems to be the thrust of the question.

[The Lord Bishop of Worcester]

My Lords, I have not consulted their Graces the most reverend Primates the Archbishops, but I feel confident in saying that we on these Benches welcome the thrust of the life-chances strategy, which the Prime Minister outlined in a recent speech. We believe, as does the Prime Minister, that the family is the best anti-poverty measure ever invented—invented by God, in fact, although the Prime Minister did not add that. The increase in funding for relationship support is welcome, but could the Minister indicate how the priorities articulated in the family test might shape the development of the life-chances strategy as it is published and implemented in due course?

[Baroness Altmann]

The life-chances strategy aims to tackle the root causes of child poverty and to help transform children’s lives. Those root causes include family breakdown, addiction, debt and worklessness. The Prime Minister has announced the doubling of funding for relationship support over the next five years, as well as the tearing down of sink estates, investment in mental health care and support for women during pregnancy.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I remind the Minister that when the Prime Minister announced this important policy in August 2014, he made a point of saying that he wanted the test to apply to every single domestic policy. That is what he said. Would the Minister be prepared to commission an independent evaluation of that policy, in early course, so that we can test whether the Prime Minister’s ambitious policy intent is being delivered in practice?

[Baroness Altmann]

My Lords, I assure the House that the family test is indeed incorporated into every new domestic policy consideration by this Government.

[Baroness Sherlock (Lab)]

My Lords, I spoke recently to a woman called Ruth, who had adopted three siblings aged under four. The children were placed with her only because she agreed to stay home in their early years, because they were very damaged. However, her husband was a vicar, and she could only afford to give up work and feed the children because of tax credits. She got in touch to say that if the Government push through the plan tomorrow to limit all benefits and tax credits to the first two children in any family, she would not be able to adopt those children in future, and they would stay in care at a cost of £40,000 per child per year. I asked the Minister how that policy passed the family test. He would not tell me. Will she?

[Baroness Altmann]

My Lords, as I said, the family test is not a tick-box exercise. Policy is always about trade-offs, but the family test ensures that family impacts are explicitly considered when making those trade-offs.

[Baroness Hollis of Heigham (Lab)]

My Lords, we spent quite a lot of time yesterday looking at issues affecting the family through the Welfare Reform and Work Bill. My noble friends Lady Lister and Lady Sherlock in particular pressed the Minister time and again as to whether these proposals in the Bill passed the family test. Answer came there none. Can the Minister tell us in what way, explicitly, the proposals in the Welfare Reform and Work Bill have been subjected to and evaluated against the family test and whether they have passed it, as she has told the House today?

[Baroness Altmann]

I can only repeat to the noble Baroness that the family test is not a pass or fail exercise. It is right to make our welfare system fairer for the working families currently paying into the system to support others, and the family test has been explicitly considered in the new policies and trade-offs necessary in all policy-making.

[The Archbishop of York]

My Lords, I hope that the family test recognises that poor families come in different shapes and sizes and that there is no intention of pushing a particular policy, of which we saw a little in China. Margaret and I had two children of our own and then fostered two children who came to us at the ages of eight and one and a half. They are now working adults. Had this family test been around, I would have been worried, as Ruth is, because that child would have found it very difficult. Will the Minister assure us that when the family test comes, common sense will prevail, not numbers?

[Baroness Altmann]

My Lords, families are the foundations of society. Strong and stable families, we know, can have a huge impact on improving the life chances of our children, and we have a clear and unqualified commitment to strengthening and supporting family life for our children and for generations to come.

State Pension: Women

Baroness Altmann Excerpts

Thursday 3rd December 2015 Lords Chamber

[The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)]

My Lords, I thank the noble Baroness, Lady Bakewell, for raising this issue once again and for securing this debate, to which it is important that I respond.

The debate highlights two integrated areas of the Government’s reform programme: the state pension age changes and the new state pension reforms. I hope to address some of the points raised by my noble friends here. I reiterate, as I have many times, that I have sympathy with the women who still feel aggrieved about their state pensions. I hope my remarks today will clarify some issues about which there has been much commentary. My aim has always been—and remains—to help people, where I can, to achieve better pensions. I hope to be able to steer future policy in positive directions to make pensions work better for people, both today and in future years.

First, I will address concerns, which the noble Baroness, Lady Bakewell, among other noble Lords, particularly focused on, that the women affected by state pension age changes were not given adequate notice of the 1995 state pension age equalisation. I recognise that there has been much criticism about the Government’s efforts to notify the women affected. However, I will explain more about what I have been told the department did on this matter.

State pension estimates, issued to individuals on request, made the 1995 changes clear. The DWP’s state pension estimates have been providing individuals with their most up-to-date state pension age since 1995. The department does not have figures before April 2000, but since then it has issued more than 11.5 million personalised state pension statements to people who requested them. We continue, as noble Lords have said, to encourage people to request one as part of our ongoing communications.

To raise further awareness of the state pension age equalisation under the Pensions Act 1995, in July 1995 the department issued leaflet EQP1a, Equality in State Pension Age: A Summary of Changes, to advise the general public on the changes. The DWP ran a pensions education campaign in 2004, which included informing people of the future equalisation of state pension age. That campaign included: advertising features in the press and women’s magazines; a “women’s pensions pack” containing leaflets for women about changes in state pension age, made available through the Pension Service; direct mailings targeted specifically at women, highlighting that women’s state pension age is changing; sending state pension forecast letters with leaflets explaining the changes to women’s state pension age to those who requested them; and developing an interactive state pension date/age calculator facility on the Pension Service website.

A 2004 DWP report, Public Awareness of State Pension Age Equalisation, reported its survey findings that 73% of those aged 45 to 54 at that time—in 2004—were aware of the changes to women’s state pension age. In addition to this, all those affected by the 1995 Act changes were sent letters from April 2009 to March 2011 using the address details we had—I admit that we may not have details for everybody, but what else could we do? It is therefore difficult for the Government to accept that people did not know that their state pension age has risen from 60, and it is not accurate to try to suggest that this is a six-year rise. The change is a maximum of one and half years.

The second concern, rightly expressed by noble Lords, concerns the short-notice changes made in 2011. Following the 2011 Act, the DWP wrote to all those directly affected individually to inform them of the change to their state pension age. By this point, state pension age was already in the process of rising. This involved sending more than 5 million letters to those affected between January 2012 and November 2013, which was a major exercise.

I will move on to the rationale behind the state pension age changes. The changes were made to ensure the affordability and financial sustainability of our state pension system, on which so many millions in the population rely. They were also of course required to remove the long-standing inequality between men’s and women’s state pension age. The previous arrangements meant that, for those reaching state pension age in 2010, women would spend on average over 40% of their adult lives in receipt of state pension, while men would receive their state pension on average for only 32% of their adult life due to their shorter life expectancy and the fact that they receive the state pension later. This was clearly unsustainable and was considered unfair by many at the time—for example, by men who were paying national insurance contributions for more years while women received their state pension earlier than them.

Parliament did not consider it fair to current or future taxpayers to continue prolonging the inequality between men’s and women’s state pension age beyond 2018. This was democratically debated and decided at the time. I campaigned hard for these women as I was aware of the problems faced by some of those affected. That campaign achieved a major concession, despite the grave fiscal situation at the time, which eased the timetable for around 250,000 of them. It committed the Government to prolonging the inequality between men’s and women’s state pension age by an extra six months relative to the original Pensions Act 2011 timetable—proposals that would cost the taxpayer more than £1 billion.

The noble Baroness, Lady Bakewell, rightly mentioned that people in an ageing population with rising longevity will work longer. Indeed, the average actual retirement age for women has for many years been above their state pension age, so clearly most women no longer wish to stop working at 60. My noble friend Lady Jenkin also rightly mentioned this. Encouraging and enabling those who want to work longer is a government priority and is the best solution to poverty in later life for those who can do so. Most people are just not “old” at 60 these days—or even at 65, in most cases—and the expectation of stopping work altogether at such a relatively young age is simply not sustainable.

Of course, I am concerned about the particular position of women—and indeed men—who cannot work. Some may have caring responsibilities, while others may suffer from disability or illness which make work difficult, but the Government will ensure that both women and men who are affected will be eligible for the in-work, out-of-work, ill-health or disability benefits that we have designed for them. Carer’s credits and carer’s allowances are available for both men and women who care for others. It also has to be said that a state pension is not a right—it is not like a private pension but is rather a social security benefit. The national insurance we pay pays for many other elements of the social insurance system: unemployment, ill health and disability benefits, as well as the NHS.

The noble Lord, Lord Stoneham, whom I thank for his warm words of welcome, rightly highlights the reasons why the new state pension reform is so important. The changes to the women’s state pension age helped pave the way for this radical major reform, which has introduced the new state pension. The cost savings resulting from those changes, and savings elsewhere, have allowed the new state pension to be introduced from April 2016. The women in their 50s whose state pension age was increased by the 2011 Act will all receive the new state pension when they reach their state pension age.

I reassure the noble Lord, Lord McKenzie, that, contrary to some media representation, the new state pension will be more generous for most women, who have historically done poorly under the current system—as I have long recognised and highlighted—largely as a result of their lower average earnings and periods of part-time working. Today we have published some analysis showing the impact of the new state pension on an individual’s pension outcome in the first 15 years of the new scheme. In that period, 70% to 75% of women will have a higher notional state pension income than under the old system.

My noble friend Lady Jenkin mentioned financial planning and financial education. She is absolutely right: this is vital, and the Government’s programme of reforms can help facilitate it. The new state pension reforms have paved the way to make auto-enrolment safe so that all workers will be entitled to a pension at work as long as they earn more than £10,000 a year. That gives us the opportunity to embed financial planning and financial education in the workforce via employers and providers. Of course, I am happy to consider meeting Shirley Conran about the important issue of female financial planning.

As I mentioned, the cost savings have paved the way for the new state pension. All of this is being done in the interests of gender and intergenerational equality and of a sustainable pension system for the future.

I thank noble Lords for their contributions. I agree that communication is vital and we are having a major communications campaign. Information is being rolled out and will continue to be rolled out in detailed blogs and advertisements, as well as in digital, radio and social media advertising. I have written extensively about this and will continue to do so.

I thank the noble Baroness for bringing forward this debate and am pleased that we have had the opportunity to discuss these vital issues. I reassure the noble Lord, Lord Stoneham, that we have no plans for further delays to auto-enrolment. We are merely aligning thresholds to make the increases in contributions easier so that we have fewer opt-outs. I want to say how much I have appreciated the quality of today’s debate and I thank noble Lords for taking part.

National Insurance Contributions (Rate Ceilings) Bill

Baroness Altmann Excerpts

Monday 30th November 2015 Lords Chamber

Moved by

[Baroness Altmann]

That the order of commitment be discharged.

[The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)]

My Lords, I understand that no amendments have been set down to the Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.

Motion agreed.

National Insurance Contributions (Rate Ceilings) Bill

Baroness Altmann Excerpts

Monday 23rd November 2015 Lords Chamber

Moved by

[Baroness Altmann]

That the bill be committed to a Committee of the Whole House.

Motion agreed.