Public Service Pensions Bill

Baroness Hollins Excerpts

Tuesday 12th February 2013 Lords Chamber

[Baroness Hollins]

My Lords, I support Amendments 19 and 20, which aim to ensure greater flexibility in the Bill with respect to pension age. Clause 9, as we have heard, links normal pension age for public sector pensions to the state pension age, with the notable exception of firefighters, police and the Armed Forces. There is a strong case for other sections of the workforce being kept under review, as proposed in these amendments. In the NHS, a review is already under way—the working longer review—of the planned increase in the normal pension age for staff in the NHS pension scheme to 68. It is being undertaken jointly by the Government, employers and health unions.

The BMA, of which I am president, strongly believes that this review should be able to make genuinely evidence-based recommendations, which should cover any—and, if so, which—front-line NHS staff who have roles that are particularly physically, mentally and/or emotionally demanding and, therefore, should have their normal pension age capped at a lower age. The review was a key component of the scheme’s specific discussions between the Government and trade unions. However, these discussions appear to have been sidelined by Clause 9.

The principle is now established that not everyone should be linked to the state pension age. The list of occupations exempted from the Bill could lead to the curious situation whereby someone within those exempted occupations could have a less physically demanding role and would be protected, whereas someone who works in front-line clinical care—perhaps in the intensive care unit—is not protected because the NHS pension scheme is not included.

In a hospital setting, for example, there is pressure to deliver 24/7 care and it does not seem fair to protect one group completely on the basis of their occupational status, yet ignore the potential needs of another group. Many front-line NHS staff are engaged in very demanding work. I hope that the Bill can be amended to allow some flexibility. Amendment 19 would allow for further categories of workers to be exempt from the state pension age link if a scheme capability review found it appropriate. I hope that the Government will support it.

In the final report of the Independent Public Service Pensions Commission, recommendation 11 states that,

“the link between the State Pension Age and Normal Pension Age should be regularly reviewed, to make sure it is still appropriate”.

As written, the Bill does not seem to allow for that. Therefore, I hope that Amendment 20 also will be supported to make this explicit in the Bill.

[Lord Newby]

My Lords, as regards Amendment 18, we are aware of, and greatly respect, the hard work done by the police, firefighters and the Armed Forces. But the noble Lord, Lord Hutton, was clear that the normal pension age for these schemes should be equal to 60, subject to regular review. As we know, this fixed age is already significantly different from the position for all other public service workers. A pension age of 60 for police and firefighters is in line with the reforms implemented by the previous Administration. We are not, and nor should we be, in the business of reducing pension ages given the longevity challenges we face. To do so would go against all that the Bill is designed to achieve.

We already have made a commitment to review these provisions as and when future changes to the state pension age are announced. Those reviews will be separate from the state pension age reviews to ensure that the specific impacts on public service schemes are taken into account. The noble Lord, Lord Eatwell, asked about where we would legislate for the DWP White Paper more generally. We will legislate separately for that. Obviously, it is not appropriate to do that in this Bill. It is a much wider issue and we will deal with the question of reviews in the context of the rest of the White Paper.

I firmly believe that the drafting of the Bill is correct on this issue and that the pension age provisions, including the link to state pension age for other schemes, are rightly the cornerstone of the legislation. It is also worth remembering that setting a normal pension age of 60 does not prevent people retiring before 60 if they wish. Early retirement factors can be taken within the scheme rules and added pension can be bought. Both of those allow for more flexibility over when people can access their pension. All three schemes captured by this amendment already allow people to take benefits from the age of 55 if they wish.

However, I will attempt to respond briefly to the points raised concerning the firefighters and the review by Dr Williams, about which the noble Lord spoke. I should start by making it clear that it is not the case that the review found evidence that a very large proportion of firefighters would not be fit enough to work to 60. The report finds that the average serving firefighter is already beyond the required fitness levels at the age of 35 to maintain operational fitness until the age of 60, if those individuals maintain their physical activity levels and BMI.

In our meeting, I discussed with the union that there is an argument for more structured and formal procedures to be in place to help people keep fit. People may spend time on physical activity but quite a lot of it might generously be called pretty informal. Getting a more formal and rigorous fitness regime in place, which would help individuals more generally as well as in their ability to work to the age of 60, falls outside the scope of the Bill and is something that the FBU no doubt will want to discuss further with its employers.

The report projects that in circumstances where people maintain their physical activity levels and BMI, individuals could maintain operational fitness in many cases until their mid-60s. We simply do not believe that it is necessary to make an amendment which enables a lower pension age than 60 for members of the firefighters’ scheme, or for the police and Armed Forces schemes.

The difference from Amendment 19 is that it would allow for exemptions to any of the normal pension age provisions currently set out, should a capability review make such a recommendation. We are not talking about just the police, firefighters and Armed Forces but all other public servants who will have their normal pension age linked to the state pension age.

I should briefly remind the House of the reason for the state pension age link in the first place. To get a grip on public finances, we were faced with a choice. We could either significantly reduce the value of scheme benefits or ask people to work slightly longer before they can receive their pension. We decided that the latter approach is best. Scheme benefits will be marginally less generous in the new schemes but only by a small amount. Instead, we are asking people to wait until their state pension age before becoming eligible for their pension. We think that this is preferable to significantly reducing benefits and increasing hard-working public servants’ reliance on means-tested benefits in their retirement.

We should remember what this state pension age link really means. For those retiring in the near future, it means waiting until the age of 66. When people talk about waiting until 67 or 68 and beyond, they are talking about several decades’ time from now. We are not talking about extending people’s working lives overnight. Instead, we have a lot of time to assess how best to adapt to extended longevity and how to ensure that employers provide the right working conditions to allow people to work up to the state pension age. That is why the NHS working longer review—to which the noble Baroness, Lady Hollins, referred—is so important.

I think everyone recognises—I made this point in Committee—that it is not just in the public sector that there are a range of occupations which people cannot do as well at the age of 67 as they can at 27. It is a challenge across society to find methods of working which reflect that so that people can carry on working to a later retirement age without being faced with undue stress during their latter years. The review is looking not at the link with retirement age but at how best to deliver NHS services with a workforce who is living longer. I am sure that other workforces in the public sector will need to follow the lead of the NHS in looking at how they can achieve that.

What we should not do is seek to make exceptions to the state pension age link. As I have outlined, the link has very little effect in the short to medium term, but it is a crucial part of the solution to the long-term problem. While we should not dig our heads in the sand, there comes a time when it is best to accept the reality of the situation: people are living longer and the public service workforce must and will adapt to that. The previous Administration recognised that when they asked all public servants—barring those whom we have identified—to work to the age of 65. We are simply future-proofing that approach by tracking the state pension age as it moves beyond 65. If we do not face up to the challenge of increases in longevity now, we would only have to do so in the near future when there will be less resource available. For those reasons, I cannot support this amendment. The universal state pension link is absolutely vital to putting public service pensions on a fair and sustainable footing. I have complete confidence that, with the appropriate foresight and common sense from employers, it will be deliverable across all the relevant public service workforces.

Finally, Amendment 20 seeks to provide for an independent review of the pension age mechanisms in this Bill. I reiterate that the Government are totally committed to reviewing the pension age, as and when future changes to the state pension age are announced. This was one of the recommendations of the noble Lord, Lord Hutton, and we are sticking to it. I add that the House should be reassured that, when coming to decisions on any changes to the state pension age, Ministers will bear in mind the consequences for public servants. We would also expect member representatives to feed into this separate process. None the less, there are good reasons why this Bill does not provide for the review to the normal pension age provisions, which would follow any state pension age reviews that result in a change to the state pension age. For a start, public service pensions link to the state pension age, not vice versa, so given that work on the state pension age reviews is still in its early stages, and we do not know exactly how it will consider public service schemes, it would be premature to lock down details of the normal pension age provisions at this stage.

More importantly, we have not yet even developed those details—and that is sensible. We should not be determining the parameters for such reviews so far in advance, nor should we be trying to do so. It would be for the Government of the day to consider what is appropriate, beyond of course taking into account any changes in longevity. If that were to involve an independent assessment, so be it. However, again, it would be for the Government of the day to decide if that were appropriate. The Government may already have had all the independent advice that they require on longevity from the wider state pension age review, depending on the final details of that process. If, during the course of that review, there was no representation from the public sector that it wished to be treated any differently from anyone else, the scope of a review would be rather less than if there was a lot of independent evidence and representations being made from the public sector that it was in a different situation from the rest of the workforce—and not just a different situation, but a worse situation. Of course, nobody is going to argue that the public sector should have a differentially higher retirement age. While we could put a bland commitment into the Bill just to review the provisions from time to time, that would not be worth while without being able to include any details. It would carry very little weight and give no more assurance on this matter than the public statements that we have made on our intentions on a number of occasions. I therefore urge the noble Lords to withdraw their amendments.