Pensions Bill [HL]
Baroness Greengross Excerpts(13 years, 6 months ago)
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Baroness Murphy
My Lords, I am sure that the noble Baroness, Lady Greengross, will be here to speak to her amendment in due course, so I am speaking on her behalf. This is not a filibuster despite the comment I have just overheard. In Committee I spoke to the suggestion that we should have a halfway house and that there should be an amelioration of the difficulties that some people will face. I have today supported the Government in the main thrust of their policy but I think that a modest change to help the few who need it would be very helpful indeed. I am now assured that the noble Baroness is in her place, and no doubt she will outline her amendment in more detail. I beg to move.
Baroness Greengross
My Lords, I start by thanking the noble Baroness, Lady Murphy. I am sorry; I did not realise that people had come back into the Chamber. I hope that my amendments will be seen as both positive and fair. They represent a compromise and would ensure that, if the Bill becomes law, no women born between 6 October 1953 and 5 April 1955 will have to work for more than one extra year before they receive their state pension. This is a particularly vulnerable group which was eloquently described by the noble Lord, Lord German, in his remarks on the previous amendment.
We know that life expectancy is rising much faster than many of us had realised, and during the Second Reading debate on this Bill I accepted the argument that rises in the state pension age must take place. However, I also said that while I understand completely that deficit reduction is a priority for the Government, this legislation could have a hugely negative impact on certain women. It will have a negative impact on many women, but some groups will be particularly affected. The 33,000 who are the worst affected will face a two-year hike in their state pension age. They will not have any possible opportunity—because they will not have had notice—that will enable them, even if they could, to plan financially for this delay in getting their state pension.
This group of women will be particularly and disproportionately hit by the Government’s proposals. It will also be the second time that these women have had their state pension age changed. Many will also be totally unaware of the changes and they will not be in any way prepared for them. Many of these women, as the noble Baroness, Lady Hollis, illustrated graphically, will be single women and women on lower incomes, who face, as we know, lower life expectancy on average. Many of them have not had a chance to accumulate any form of private pension. They will be reliant solely on the state pension. Many of these women care for older parents or younger grandchildren, and sometimes both at the same time.
Furthermore, the timetable proposed in the Bill is faster than that laid out in the coalition agreement, which promised that the state pension age would not start to rise to 66 until 2020 at the earliest. I do not think I am alone in having received many letters illustrating this point from people who are going to be caught out by this change, which would in any case not offer any immediate help in cutting the deficit, because, as we have heard, there will not be any savings until 2016, by which time the Government plan to have eliminated the current deficit.
The figures in the table I have produced have been verified by some key experts in the pension field as dealing with a particularly difficult problem. Many people I know feel very strongly about this matter and by accepting these amendments the Government could—and I hope will—demonstrate that they want to help the people most affected and worst affected by this necessary reform of the state pension age. I very much hope that the Minister will support my amendments.
Pensions Bill [HL]
Baroness Greengross Excerpts(13 years, 7 months ago)
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Lord Boswell of Aynho
Perhaps I may briefly invite my noble friend to consider one particular point about the raising of the threshold. There is no need for a commitment at this stage, although it has been implied that it will be considered. Can my noble friend give some thought to, and discuss with his Treasury colleagues, the way in which this might be introduced annually into the national consciousness? I hesitate to dangle another red herring before the Committee in the shape of the national minimum wage, on which I have some prior form. However, if we are beginning to look at the impact on labour markets of a number of items, and some of the misguided or inappropriate claims that are made, or the fact that people say, “I don’t think I can afford that anymore and I want to pull out”, it would be useful to have a national economic snapshot. Although this is strictly about the labour market and within the Minister’s remit by definition because he is legislating on it, it is part of a national economic snapshot. Some people may have noticed today in relation to the national minimum wage a suggestion with which I do not agree—that we should announce it and defer it for 12 months. I merely make the point that probably on the occasion of a Budget it would be useful to have an annual appraisal that was keyed in and could be related by the commentators to tax rates, take-home pay and so forth. It would add to clarity and transparency.
Baroness Greengross
At Second Reading, I stressed the point that one good aspect of the trigger was that it would help prevent employees and employers from making very small contributions. This is still an important point.
Lord Freud
My Lords, first, I thank the noble Lord, Lord McKenzie, for leaping into the breach and allowing us to have this debate on the issue about the trigger at which an individual is automatically enrolled being reduced. We are looking at the three amendments, together with the amendment of the noble Baroness, Lady Turner.
The reference to the potential move to the tax threshold is a really important issue that deserves a robust debate in its own right. We have an opportunity to debate it in later amendments. Rather than pre-empting that debate—in which I will make a commitment—I turn to the specific proposals in the amendment. We have committed to alignment with next year’s tax threshold of £7,475. This is the right direction of travel. However, we also need to retain flexibility for the future in order that we continue to target the right groups at the right times. I very much take the point of the noble Lord, Lord Boswell. There are quite a few issues that have to be looked at in the context of that debate. Let me put that to one side because we will be reverting to it. I apologise for the scars that the noble Lord, Lord McKenzie, bears. As a result of the level of uncertainty that exists in the structure of the pension system, we look to have rather more freedom of manoeuvre than he was able to enjoy.
This Government have always supported automatic enrolment into workplace pensions. We believe that it is the step change that will make a critical difference to a boost in retirement savings. However, we also believe that the new automatic enrolment earnings trigger is a significant improvement to the breakthrough in pension reforms that the noble Lord, Lord McKenzie, and so many other members of this and another place work so tirelessly to develop. Automatic enrolment for every individual into pension saving is not always the right thing to do. The key question is, and always has been, whether low earners would benefit from saving, as the noble Lord, Lord Stoneham, pointed out. It makes no sense to require people to sacrifice income during their working life and redirect it into private pension saving, when that saving makes them no better off.
The nub of this issue is about getting the right people saving. We, therefore, commissioned an independent review to ensure that the scope proposed for automatic enrolment by the previous Government was right. We wanted to look again at the point at which people should be auto-enrolled to ensure that we capture the right group.
Pensions Bill [HL]
Baroness Greengross Excerpts(13 years, 7 months ago)
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Baroness Greengross
My Lords, I declare an interest in that I head up ILC-UK, one of 12 organisations across the world that look at planning for the future in the light of demographic change. I agree with the Minister that, while we all celebrate the incredible changes in life expectancy and we all hope to benefit from them, they present us with enormous challenges that we all must try to meet in a fair, just and realistic way. I am therefore pleased to take part in this Second Reading debate.
I am sure that all of us in this House would support the aim of getting more people to save for their old age. I particularly welcome the fact that NEST is designed particularly to meet the needs of people who are largely new to pension saving. I am certain that NEST will be a valuable addition to the pensions landscape and I welcome the incorporation into the Bill of the recommendations of the 2012 review team to widen pension provision and to help to keep existing schemes open.
One good aspect of the earnings trigger of £7,475, which the noble Baroness, Lady Drake, was worried about, is that it should help to prevent employees and employers from making very small contributions. However, while welcoming the Bill, we must be alert to the possibility of unintended consequences. Unless we deal with them, there could be a lot of losers as well as winners, as other noble Lords have pointed out.
I will make brief comments about the three key areas of the Bill: auto-enrolment and its particular relevance for older workers; raising the state pension age and, in particular, the impact on older women, as has been mentioned; and the move from RPI to CPI and its impact on older people.
The Bill introduces an optional waiting period for auto-enrolment so that an employer can give an employee notice that their auto-enrolment will be delayed by up to three months. However, to ensure that those workers who have their auto-enrolment deferred are aware of their rights and to encourage consumers to take personal responsibility for their pension saving, it is important that the notice should state clearly that the worker retains the right to opt in to the pension scheme at any time.
The full implementation of auto-enrolment throws into sharp focus some of the remaining unresolved issues surrounding the NEST proposition. Any amount saved in a personal pension has to be better than nothing and even a small pot may make a difference at the marginal level, where most people are. A minor issue that immediately springs to mind is the fact that transfers to NEST are currently heavily restricted. Allowing an employee to transfer pension pots—especially small ones—into NEST would encourage better pension savings and take away the burden of administering small pension pots from the employer and the pension scheme. I hope that the Minister will consider this point.
Personal accounts may not be suitable for all employees, particularly for low-earning individuals of 50 and over, as the charging structure of NEST and the phasing in and staging of auto-enrolment and the employer contribution could significantly reduce the size and value of savings pots for those close to pension age, particularly single people. At the same time, depending on overall household income, they could lose their entitlement to means-tested benefits. It is worth considering whether these people would get better value from devoting their funds to other forms of saving, such as ISAs, during their working life. Perhaps the noble Lord will consider that.
In order to manage expectations and to reduce the risk of disappointment at retirement, would it not make sense to impose the simple requirement on the employer that at enrolment the jobholder would be provided with an annual pension benefits forecast based on their statutory retirement age, which would include the impact that such benefits could have on any entitlement to state means-tested benefits? Such a forecast would complement any state pension forecast obtained from the Pension Service. The jobholder would then have the option to seek further advice and, if appropriate, to opt out of a personal account and consider alternative savings arrangements.
The raising of the state pension age was due to take effect between 2024 and 2026 but, because it is being brought forward, the timetable in the Pensions Act 1995 will be accelerated so that the state pension age for women will reach 65 by November 2018. The effect is that, although no men will have to work longer than an extra 12 months, half a million women will have to work at least a year longer, as the noble Baroness, Lady Drake, said. Three hundred thousand of those are going to have to work an extra 18 months, while 33,000, born between 6 March and 5 April 1954, will have to work two extra years.
I understand that deficit reduction is a priority for the Government, but the legislation is discriminatory against women born in 1954. I do not expect that I am alone in having received several letters illustrating this point from people who are, or feel, caught out by this change. It will hit them very harshly but make no impact on the deficit reduction in this Parliament. My concern is that those who will suffer are the most vulnerable women. Many are single; they have not had a chance to accumulate a private pension and will be reliant solely on the state pension. Many will also be unaware of the changes and will not be prepared. We need to give people time to order their affairs. For those who are going to have to work an extra two years, this is very unfair. The changes seem to be contrary to the coalition agreement, which said that any rise to 66 would not start sooner than 2020 for women. Therefore, could Her Majesty’s Government consider leaving the increase in the state pension age to 66 until 2020, when under the current timetable women’s state pension age will reach 65? I do not know whether the Minister can give me any reassurance on that.
Although the removal of a default retirement age will be welcomed by those who would prefer to continue working beyond 65, the recent Marmot report on health inequalities in England—mentioned by the noble Lord, Lord German—highlighted the fact that around 75 per cent of the population will not be healthy enough to work until the age of 68. Such figures are a clear argument in favour of more investment in preventive healthcare. If the Government are to succeed in extending the working age without creating inequitable outcomes, they need to place more emphasis on job quality, support for people with care responsibilities and the creation of transferable skills among the older workforce. In addition, not only is ill health a major factor in early retirement but it is more likely to affect lower-skilled workers, who tend to have less generous pension arrangements. We wonder what will happen to those who are forced to retire before the state pension age because of ill health but who do not have access to private or personal pension income to tide them over until they receive their state pension at this later age. Perhaps the Minister can elaborate a little on that.
Lastly, I wish to make a brief observation on the decision to use CPI rather than RPI as the measure for inflation indexation. As we know, the major difference between them is that CPI does not include housing costs—the effect of mortgage rates or council tax being part of that. Last week, the DWP published an impact assessment of the costs of the Government’s decision for members of defined benefit pension schemes. The effect of the move from RPI to CPI for protecting the value of future pensions is to reduce the value of benefits over the next 15 years by £83 billion. As the DWP puts it:
“The main cost of this policy is to members of private sector DB pension schemes who will see the anticipated value of their pension rights reduced and the value of their total remuneration package reduced in the short term”.
The value of this reduction in pension rights and total remuneration equates to a significant £5.7 billion per annum. For 2 million relevant active members of pension schemes, the reduction in their annual rate of pension accrual is broadly the same as a pay cut of between £2,250 and £2,500 a year on average. That is the implied fall in their total remuneration, including the value of the pension promise made to them by their employer. However, they will not feel it until they retire, when their pensions will be up to 12 per cent lower than would otherwise have been the case in real terms in 2027 and 20 per cent lower in 2050. This is a reduction in the value of pensions to pension scheme members and is a transfer from them to shareholders.
The changes in inflation indexing that will occur as we move from RPI to CPI will impact older pensioners in particular. According to Age UK’s silver retail prices index, the impact of inflation on those in later life is far greater than estimated by official measures. For example, since the beginning of 2008, those aged over 55 have experienced price rises at almost two percentage points above that suggested by headline RPI figures, rising to four percentage points for those over 75. The gap between real and headline inflation over that period has cost the average 60 year-old £620 a year, rising to over £700 for someone aged between 65 and 69. This is mainly down to the different impact that fuel and energy price increases, reductions in savings rates, increases in mortgage interest payments and so on have on older people’s, versus younger people’s, spending power.
The Government have said that CPI is a more appropriate measure of pensioners’ costs than the RPI but they have not given any detailed explanation of that. I do not agree that it is a better measure. Since 1997, the CPI has, on average, been around 0.8 per cent lower that the RPI. One important reason for this is that it excludes housing costs, as has been said. I believe that the Government should retain the RPI as the main measure to be used where pensions and state benefits are linked to price increases. I hope that the noble Lord can assure me on some of those points.
Poverty
Baroness Greengross Excerpts(14 years, 2 months ago)
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Baroness Greengross
My Lords, the Government have made a strong commitment to fairness, but there are some grave concerns about certain groups among us who were already suffering from poverty and whose situation will be worsened following the Budget announcement. Careful attention needs to be paid to those people who are most affected.
In 2007-08, 13.5 million people in this country were living in households below the low-income threshold of 60 per cent or less of the average income. This is about a fifth of the population and an increase of 1.5 million compared with three years previously. We know that the UK has a higher proportion of its population in relative low income than most other EU countries. Of the 27 EU countries, only four have a higher rate than the United Kingdom.
We know that health inequalities associated with socio-economic status are pervasive and can be found in all aspects of health, from infant death to the risk of mental ill health. We also know that life expectancy is closely related to this. The difference in life expectancy between the leafy suburbs of the south-east and the inner-city deprived areas of the far north can be as much as 17 years. This is a death sentence and is totally unacceptable.
I turn to disabled people, who were movingly described by the noble Lord, Lord Touhig. About a third of working-age disabled adults live in low-income households, which is twice the rate of that for non-disabled adults. The gap between the two is markedly higher than a decade ago.
In the Budget, many entitlements were scaled back. The Work and Pensions Secretary admitted that the decision of the Cabinet to scrap free school meals for working parents’ children and reduce the number of people who get tax credits made his own long-term goal to alleviate unacceptable levels of poverty and social exclusion difficult.
An issue which particularly affects older people—although not exclusively—is that of excess winter deaths. In 2008-09 the number of winter deaths increased by 36,700 compared with the average for the non-winter period—a 49 per cent increase compared with the number in the previous winter of 2007-08. The elderly population experiences the greatest increase in deaths each winter. In 2008-09 there were 29,400 more deaths among people aged 75 and over as compared with those in the non-winter period. In contrast there 7,300 among those under the age of 75. That is a terrible differential.
On fuel poverty, in 2007, 2.8 million households in England alone were classified as being in fuel poverty. In 2004, 5.9 per cent of households were considered to be fuel poor, but that rose to 7.2 per cent in 2005; 11.5 per cent in 2006; and it went up to 13.2 per cent in 2007. Fuel poverty is increasing mostly because of the continued significant increases in fuel prices, and VAT increases will be passed on directly to the consumer, making the situation of people suffering fuel poverty even worse.
The Fuel Poverty Advisory Group has estimated that 4.6 million homes across England could now be in fuel poverty. It added that investment in energy infrastructure and measures to reduce greenhouse gases were essential but that the cost of these was largely passed on to consumers and that bills could soar by a further 50 per cent. Both overall and among those in low-income, single-person households, many people are more likely to be in fuel poverty than other household types by 2020.
On the issue of decent homes, in 2008 about 7.4 million homes were described as non-decent—that is one-third of our homes. Overall, homes in the social sector were in a better condition than those in the private sector, where most poor older people live; 27 per cent are non-decent compared to 34 per cent previously. For vulnerable groups, 24 per cent of private homes had at least one category 1 hazard; 13 per cent in social rented homes; and 31 per cent in private rented homes. The National Audit Office examination of the decent homes programme concluded that while good progress has been made there are risks in terms of completing the target to eliminate non-decent social rented homes—originally by 2010—and of a new build-up of a repairs backlog if a new programme is not put into place. Such a new programme seems remote in the current circumstances.
By capping housing benefit nationally, the Budget creates real issues in London and the south-east particularly. That, together with the regressive nature of VAT, means that the Chancellor has got his work cut out to prove that he is putting fairness first, particularly in the longer term. I hope the Government will consider these issues.
Disabled People: UN Convention
Baroness Greengross Excerpts(14 years, 3 months ago)
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Baroness Greengross
To ask Her Majesty’s Government what steps they are taking to implement the United Nations Convention on the Rights of Persons with Disabilities.
Baroness Greengross
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I declare an interest as a member of the Equality and Human Rights Commission.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this Government are committed to the Convention on the Rights of Persons with Disabilities and to using it as a driver to achieve equality for disabled people. The Office for Disability Issues is co-ordinating implementation, monitoring and reporting across government and the devolved Administrations to ensure that they are aware of the need to take the convention into account in developing policies, and that they involve disabled people and their organisations in doing so.
Baroness Greengross
In thanking the Minister for his reply, I recognise the huge resource challenge we all face and I welcome the Government’s commitment to ensure that fairness is at the heart of any financial decisions that will be made. In light of the recent announcements around welfare reform, including incapacity benefit and disability living allowance, and the possibility of a delay in implementing the Equality Act, can the Minister assure the House that every step is being taken to make sure that spending cuts do not impede the implementation of the UN convention and that full equality impact assessments are carried out so that the impact on disabled people is actively and appropriately considered?
Lord Freud
My Lords, I am grateful to the noble Baroness for her informed questions, which I know come from her interest in and passion for equality issues. I can assure her that we will treat this convention with great seriousness and will push ahead to make sure that it does not slow down. Next July, we are due to report on progress in this area. We will be pushing to make sure that we do so to time. I can also assure her that in our welfare reforms we will look precisely at making sure that those who need support the most continue to receive it.
Pensions: Automatic Enrolment
Baroness Greengross Excerpts(14 years, 3 months ago)
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Baroness Greengross
My Lords, I declare an interest as president of the Pensions Policy Institute and head of the UK International Longevity Centre. I, too, congratulate the noble Lord, Lord Kirkwood, on securing a very timely debate. He has raised some important issues and asked some significant questions. I also congratulate the other speakers today, who have been quite exceptional. I know that those who follow me will be the same, so my comments will be brief.
I am supportive of auto-enrolment but above all of the important consensus that has emerged about long-term pensions issues. Personal accounts may not be suitable for all employees due to their interaction with means-tested benefits. This particularly applies to workers over 55 years of age, who will always have insufficient time before retirement to accumulate a significant fund under the scheme. However, they may have just enough pension to reduce any benefit entitlement, including passported benefits, such as council tax relief, pound for pound. As I have said previously, this does not mean that people should not be auto-enrolled, but it implies that people will need, as the noble Lords, Lord Kirkwood and Lord Fowler, said, clear information and generic advice to help them to make informed decisions about whether they should stay in or opt out of personal accounts
The noble Lord, Lord Fowler, pointed to the extraordinarily awful levels of ignorance among the general public. The issues are who pays for the information and who will provide the information and advice, particularly down the line at the decumulation stage when employment has ceased. An important test of the personal accounts policy will be whether it is possible to design information and generic advice in a simple and easy-to-understand way to help people to decide whether they should opt out of personal accounts.
There are policy options that the Government could consider to improve the incentives to save for some groups, particularly those who are heavily at risk. I hope that the Minister will be able to indicate some of the thinking along these lines. Increasing the trivial commutation limit or introducing a limited pension income disregard could improve the returns from personal accounts for some individuals at a cost of increasing government expenditure on means-tested benefits.
I know that these are difficult decisions for the Government to make. I agree with the noble Lord, Lord Kirkwood, that a working group of experts to consider some of the important issues that have been raised today might be helpful in taking things forward. We must get this right in the long term as well as the short term.