Baroness Hollis of Heigham
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Pensions Bill
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Baroness Hollis of Heigham (Lab)
My Lords, the Minister has been very helpful in his introduction, but how can the consultation that he reports he has had with possible users be at all meaningful when they do not know how much they are going to have to pay and what they may be likely to get? Following that, can he give us any indication of the ball-park figure? Say someone is 70: what is the lowest possible price and the range for which the extra year of pension will be bought? Otherwise, people’s views cannot be taken seriously because they have not got the relevant information.
Lord McKenzie of Luton (Lab)
My Lords, following my noble friend Lady Hollis, I support the inquiry about the pricing structure and whether we will know that by the time the Bill completes its passage through your Lordships’ House. I listened carefully to the Minister’s explanation, because at the heart of it this is basically a savings plan. It is effectively an annuity arrangement. It is attached to the additional state pension but you could delete all that and describe the fundamental proposition here very much as an annuity. We know that that cannot be done because the DWP does not have the power to do it. However, we should be clear what this is about.
It is attached to the additional state pension and gives people a chance to enhance provision they have made in that respect. As I understand it, you could avail yourself of this opportunity if there was currently no additional state pension due—or there was a very significant amount of additional state pension due because you had been investing heavily in it, certainly above the level of the single tier of pension. Indeed, if somebody was contracted out of additional state pension I think they would still be able to avail themselves of this opportunity. I am just trying to work out how easily that sits with the whole concept—this is all about people who have reinvested in additional state pension, not just about an investment product.
I did not find the rationale for leaving these arrangements open for only a limited period, and the online survey is a bit difficult to interpret. Can the Minister give us any more information about the expectation of the number of people likely to take this up and the amounts that they are likely to take up? The Minister said—and this was said in the briefing session as well—that nothing has been scored in respect of these proposals so far as the public accounts are concerned, but presumably it will be scored at the next Budget, and certainly credit for any take-up of this will feature in the year 2015-16, presumably with its consequential impact on the deficit and government debt arrangements. Indeed, the lump sum would be taken out in the year in which it is received, and the flow of pension contributions will just score over the years and decades ahead.
Given the nature of this, I am interested to understand the sort of explanations and information that people will be given when they are looking to make their choices. In a sense, the information about their class 3 and 3A voluntary contributions is relatively straightforward, but we are in an environment where we know the annuities market is generally very opaque. The Financial Conduct Authority is on the point of publishing a review of the annuities market. Given the closeness of this product to annuities, what sort and range of advice and information is it proposed that the Government will provide for people thinking about taking up these opportunities? We accept some of the potential benefits. In a sense, it is risk free; it is inflation protected; and it can be shared on divorce. One sees the benefit of those arrangements, but I have one or two queries on the wording of the amendment which I hope the Minister can help me with.
Baroness Hollis of Heigham
Would my noble friend not agree that the Treasury is following the same philosophy as it is in trying to abolish the lump sum as an option for people who have deferred taking their state pension for two years in order to avoid paying out the money upfront and is now trying to do exactly the same thing—a sort of mirror opposite—in terms of this package?
Lord McKenzie of Luton
Indeed, I agree with my noble friend. It is the converse of that. A cynic might say that this is all to do with managing the deficit and the debt in the run-up to a general election, but that is for us cynics, I guess.
Looking at Amendment 62, I wonder whether the Minister can help me out on what will eventually be new Section 14B dealing with the arrangements for repayment of contributions. I am a little unclear about proposed new subsection 14B(4), which states:
“Regulations under subsection (1) may provide for benefits paid to a person because of the unit of additional pension to be recovered by deducting them from the repayment”.
I am not quite sure whether the benefits referred to there are the additional pension that has hitherto been received or whether there is something else because typically one would not expect extra benefits to be paid if somebody has extra income—quite the reverse. Perhaps the Minister can help me on that provision.
Proposed new Section 61ZA is headed “Shortfall in contributions”. I was a bit bemused by this. It states:
“This section applies to a person who has one or more units of additional pension if the person … is not entitled to a Category A retirement pension, but … would be entitled to a Category A retirement pension if the relevant contribution conditions were satisfied”.
It goes on:
“The relevant contribution conditions are to be taken to be satisfied”,
but in a sense it negates the impact of that in terms of payments as you get only the additional pension attributable to units of additional pension. I was trying to fathom what that was about because if somebody is not entitled to a category A pension presumably they would only be entitled at all if they had a category B or D pension. Or is this saying, basically, that even though you do not have a pension entitlement, we will treat you as having a pension entitlement for the purposes of being able to take up these provisions? That seems to undercut one of the two requirements—and there are only two requirements—to be able to access these arrangements.
I do not know why there needs to be consultation with the Government Actuary or the deputy Government Actuary—I do not know whether you can choose who to go to for advice. I would have thought that going to the Government Actuary’s Department would include going to the deputy if the Government Actuary is not available. But there may be good reason for that formulation. This may well be a nice little earner and deserve support on that basis, but until we know more detail it is difficult to judge. It is an odd formulation to attach this to the additional state pension in the way that is proposed.
Lord Browne of Ladyton
It is the pension cap that this Committee is discussing. I am grateful for that clarification, which was appropriate at this time.
Finally, there are the decision points for individuals. Will they get advice on whether they should buy class 3A contributions? After all, there are significant considerations for individuals, such as their life expectancy, which may be significantly affected by where they live in the United Kingdom; whether they are married or in a civil partnership, or likely to be so; and what other income or savings they have—and, therefore, whether it is a good idea, if it may affect their entitlement to incapability benefits, for example. After all, if someone with £10,000 in savings decided to spend £4,000 of those in buying another £5 in income, would they not simply lose that in pension credit and have 40% less of their savings? For all the reasons that we have discussed, those savings may be necessary at later stages in their life. Crucially, who would sell this to them? In the context of the briefing that we received from the Minister’s team, we were told that engagement between the purchasers of this and the Government would be through the Treasury. Does that mean that the Treasury will have certain responsibilities to people who call to inquire about buying these class 3A contributions? If so, how will they be discharged?
There are many questions to ask. The Committee will not be surprised if the Minister cannot answer them all now, because, with respect, he was unable to answer even any of his own questions on his introductory remarks. We may have to wait and see about some of the detail. I understand the reasons for haste; this legislative vehicle is important for this initiative and, if it proves to be positive, that is a good thing. But the scheme was rushed out in the Autumn Statement and added on to the Bill when it had gone through another place. We have no costings or details on price, and no idea how it will be administered—but we still look forward very much to the Minister’s reply.
Baroness Hollis of Heigham
Can I ask a question following on from my noble friend about the interaction of pension credit, which I was trying to tease out as he was going along? At the moment, if you have savings of more than about £40,000, the first £10,000 of pension credit capital is disregarded for pension credit purposes. Thereafter, you have the tariff income of £1 for every £500, which means that if you have savings at the moment of about £40,000 and you are single—I am not sure how it would work for a couple, because I do not have the figures in my head—you would be just about ineligible for pension credit, because your tariff income would float you above it. But turn that capital into a pension, given the fairly unattractive rates for annuity purposes, and I think as a result you would come into pension credit. I shall try to do some more work on this as the discussion moves on, but, if I am right, what the Minister will get in upfront savings he will lose not only in payments in perpetuity while those people live, through his additional pension, but also the immediate payments he will have to make in pension credit—because, having disbursed their capital, they will now come within the pension credit income rules.
Lord Freud
I need to thank noble Lords, as usual, for a mine of interesting questions, and I shall try to deal with as many as I can. On the point that the noble Baroness, Lady Hollis, raised about the research and the understanding of the prices, we are clearly looking at how much the original research needs to be complemented—and, indeed, we may consider more polling work. The original testing was based on a stylised scheme, and further work, playing in the fact that the scheme is secured in national insurance and state pension, may be beneficial. We will also look to consider qualitative research to find out what sort of barriers there may be to taking up class 3A contributions, and I will be happy to provide further details of that research. On the question raised by the noble Lord, Lord Browne, about whether some of that research needs to be redone, I think we would say that it needs to be complemented.
The example of £1,248 raised by the noble Lord, Lord Browne, was not the cost of £1 for a 65 year-old; it was illustrative only, and we are looking to do some more research on the final price. In answer to questions from both the noble Lords, Lord Browne and Lord McKenzie, about information and timing, we will provide comprehensive information and get it quality assured by stakeholders, and we build on the kind of information we provide for class 3, which noble Lords will be familiar with. This is the standard background that we will build on.
The noble Lord, Lord Browne, raised the question of the amount of financial advice that people will need before buying class 3A. Again, in this document, as in others, we draw people’s attention to the fact that they may wish to take independent financial advice before taking a decision that could affect their current or future income. We also need to note that HMRC, rather than the Treasury, administers this scheme.
On the point about pension credit that the noble Baroness, Lady Hollis, was developing in front of our eyes, she is correct that some people would come within the scope of pension credit, but it is up to the decision-maker to decide whether people deprive themselves of capital in order to derive income. We will look at that point further.
Baroness Hollis of Heigham
There is certainly a rule within all social security, along with the rule that capital may be treated as income and income treated as capital, that you may not wilfully deprive yourself of capital in order to boost income. However, to do so wilfully in response to a government campaign would be very different from handing a gift of £10,000 to your grandchild. I think that the Government would be open to mis-selling claims if they went down that road. I do warn the Minister.
Lord Freud
I am, of course, always very grateful for warnings from the noble Baroness or other members of the Committee. That is clearly one of the areas in which quite a lot of detailed work needs to be done. I suspect that it is a minority sport that she is defining, but nevertheless we will need to look at it.
On the question of the noble Lord, Lord McKenzie, about what pension entitlement is necessary, people can have a pension entitlement that consists of graduated retirement benefit or state pension based on their own record of national insurance, which is a category A pension, or one derived from a spouse or civil partner’s record, which is a category B pension. Proposed new Section 61ZA overrides the rules that prevent people having an entitlement to more than one pension at a time.
On the question about what we call it, I think that the noble Lord called it a savings vehicle. We have to be rather careful in our language, which the noble Lord was good enough to recognise and acknowledge. Class 3A will be a one-off opportunity for today’s pensioners, with a cap on the amount of additional pension that can be bought and a limited window during which applications can be taken. As with other forms of voluntary national insurance, we do not expect it to be seen as an investment in a commercial sense. As class 3A is not an investment product, it does not require regulation by the Financial Conduct Authority and, therefore, people with defined contribution pension savings will not be able to get their pension pot refunded in order to take up class 3A as an alternative to an annuity.
On the point raised by the noble Lord, Lord Browne, about the belt and braces approach of the Government Actuary or the Deputy Government Actuary, this is a provision to cover situations where the post of the Government Actuary is vacant. It enables engagement for consideration. I know the noble Lord takes an Occam’s razor attitude to legislation, but that is the reason.
The question from the noble Lord, Lord McKenzie, on the recovery—
Baroness Hollis of Heigham
My Lords, in moving this amendment, I suspect I will also speak to some of the other amendments in the group en route. Clause 26 states that the Secretary of State must review pensionable age from time to time,
“having regard to life expectancy and other factors”,
he considers relevant. In preparing this report he must consult GAD and a panel appointed by him which will produce their own reports to inform his. All that seems entirely sensible and I welcome it.
This amendment is a limited and modest one, which I hope the Government will find helpful and might even accept. It simply asks to put in the Bill, for the avoidance of doubt, those factors that the White Paper of January 2013 on page 77, paragraph 161 stated:
“are expected to be considered”.
There is also one additional factor, gender, which slightly oddly was omitted.
What factors does the White Paper expect “to be considered” both by the Secretary of State and the review body? The first is:
“evidence of variations in life expectancy … by socio-economic class”,
and therefore, by implication, as my noble friend Lady Turner said, by occupation, and by geographic reason. Secondly, there are,
“trends in healthy life expectancy”,
a point I am sure we will pick up and explore as my noble friend already has done in referring to the Marmot report. Thirdly, there are
“alternative ways of measuring life expectancy”,
and, finally,
“impact on the labour market”.
As I said, all these factors, which the amendment seeks to put in the Bill, come from page 77 of the Government’s own White Paper from January 2013—The Single-tier Pension: a Simple Foundation for Saving. The only missing factor, as I have said, which I have added in was gender, which I presume was an oversight, given the recent fusses we have had over unisex annuity rates and the like. This amendment is very simple. It seeks to put in the Bill that the considerations in the Government’s White Paper will come into play.
Why bother to spell it out in the Bill instead of leaving well alone and keeping it in the White Paper? My noble friend has mentioned the Marmot report, which was highly important. I, and I am sure other Members of the Committee, have read—and I know the Chair of the Committee knows it very well—the recent Lords report from the Committee chaired by the noble Lord, Lord Filkin, called Ready for Ageing?. I have been through all of its 1,000-plus pages of evidence. It was an important and valuable report, especially for the evidence coming in from the wide range of contributors. However, I was surprised to see how relatively little attention, particularly in the recommendations, was paid to these other factors. Instead, there is an insistence on trying to connect retirement age, in some rather formulaic way, to increased longevity, as, I fear, the Minister has just done.
We have recently had the Autumn Statement, in which the Chancellor of the Exchequer again seems to think that retirement age should be mechanistically linked to longevity by defining a set proportion of adult life that should be spent in retirement, irrespective of what happens to whom or what the quality of that retirement is like. It is all, in my view, highly elitist, and I am delighted that the DWP is not following the Chancellor’s approach, which is the easy, mechanistic way, but is seeking appropriate evidence with which to inform its decisions. This amendment would strengthen the DWP’s decent, evidence-based approach against a simplistic, bulldozing Chancellor, now or in the future, who wanted easy money to cut the welfare budget in its entirety by raising the state pension age.
What are the issues? Some have been touched on by my noble friend Lady Turner. Most commentators go over the well worn statistics—a year for every three or four years; the doubling of numbers of those over 85; the trebling of centenarians, and so on. They end up with the glib assumption that we cannot afford it so we must all work longer or, more specifically, delay drawing our pension to pay for all those—not us, of course—who in future will linger too long; and if we do not do this we are destroying the life chances of our children and grandchildren. That argument is pretty well nonsense. The issue of affordability is invariably prayed in aid and is, I think, inappropriately stated—indeed, badly misstated.
The first point is that half the population growth among the elderly, by which we are so financially frightened, is a temporary bulge left over from the baby boomers and will scale down from the 2030s on, at which point we will have one of the best worker/pensioner support ratios in Europe. I do not think the Chancellor told us that, if he actually knew it. The second point is that I remember doing a speech at the Institute of Directors 18 months or so ago and to a man—as, indeed, they were—they thought that the state pension age should be 70 and that they should have the right to dismiss staff at 65. No connection was made between the two. There is little point in raising the state pension age if people do not stay in the labour market. It merely means that they linger longer in the twilight of inadequate working-age benefits.
The latest statistics I have—the Minister’s may be more up-to-date—is that some 30% of men have left the labour market before the state pension age of 65, though the averages are skewed and in practice it is actually a higher number because some men, and women, continue working for a couple of years after 65, a subject we debated when talking about lump sums earlier in Committee. At the moment, that 30% or so of men who leave the labour market early, whether through unemployment or poor health, are protected. This is a point that is never raised in any of these discussions and I do not know why, because it is very relevant. They are protected because they can claim pension credit on the same terms as women and thus, while pension age remains unequal, they have, or have had, a level of benefit equivalent to the state pension topped up by pension credit for up to five years while they linger in the twilight world between leaving work and pension credit age. That will disappear as the state pension age is equalised and poorer men, unable to work but unable officially to retire will find themselves in a no-man’s land on a low level of benefits with no top-up by pension credit as the state pension age continues to rise. As far as I know, no consideration at all has been given to that by anyone, and it should have been.
I come to my third point. What matters, therefore, when we consider the cost of state pensions is their percentage of GDP, which over the next 20 years will actually fall. Why has that not been brought into play as an argument? It depends also on employment levels and productivity during working years; savings ratios, including pensions, which conventionally are not counted in the savings ratio—the difference between outgoings and incomings; rising real incomes, which can buy adequate heating and food, both before and during retirement; and the ability in the later years of retirement, the decade of growing disability, to release assets such as one’s home. Those are also not counted in the savings ratio—and there is a big difference between us and Germany. That could be done by trading down, or equity release, can help co-payment of the cost of old age. Then there is the degree to which heavy-end caring, especially dementia, can be pushed back.
Lord Freud
When I last talked to the noble Lord he was pretty indifferent about his pronunciation, but I apologise to the noble Lord, Lord Stoneham. He made a point which I want to reinforce. When we are looking out for 10, 20 or more years, it is quite difficult to specify all the considerations that a review should take into account. The risk is that that if you specify them, you become restricted.
Baroness Hollis of Heigham
The Minister is being a little unfair in this argument because at no stage did I suggest that we remove the words “other factors”. They would remain. All I am trying to do is transpose the wording from this document into the Bill; they are both the Government’s documents.
Lord Freud
I am very grateful to the noble Baroness for her advice, but we want to make sure that future Governments look at this themselves, take a proactive approach to the review process and are transparent and conscious about what they are commissioning. Stipulating now all the variables and all the factors to be taken into account restricts rather than supports that responsibility. Greater discretion will also allow an iterative approach with future Governments building on the reviews of previous ones.
A lighter touch approach will help to generate more debate at the time when the state pension age review is conducted. This should encourage all interested parties across Parliament and industry to feed in their thoughts and contributions and involve them better in the process.
The noble Baroness and, indeed, the noble Lord, Lord Whitty, discussed quite a lot of the factors. I do not wish to get into a huge debate about healthy life expectancy, and so on, but I will make just make a few points on it. The first is to warn noble Lords that the ONS measure of healthy life expectancy from 2000 onwards was changed to run in comparison with our EU partners, so we do not have a consistent data run for the whole period, although we have evidence that shows that healthy life expectancy has increased consistently since the 1980s. Do not use the run because there is a discontinuity in it.
Lord Freud
It is a very fair point that health is, importantly, attitudinal. It is not a matter of just taking a medical model for this. I accept that point.
However, where we have an unbroken record, which is the time spent free of disability, which runs from 1981 to 2010, the figure for men in Great Britain rose by 2.9 years and by 2.8 years for women. It is possible to take a rather more encouraging attitude towards our healthy life expectancy compared with some of the gloom I sometimes hear. The House of Lords report, Ready for Ageing—the Filkin review to which the noble Baroness referred—concluded:
“The Government were right to raise the state pension age, but they are now adopting a timetable of increases slower than that recommended by the Turner Commission and will have to revisit this with rising healthy life expectancy”.
Baroness Hollis of Heigham
Yes, but one of the problems is that people quote that without reading the 980 pages of evidence that went with it, which show that the summary of those recommendations did not pick up most of the debates in the evidence.
Lord Freud
My Lords, I can only go with the conclusion that I would like to leave on the record alongside my warning to take a little care on some of the conclusions that have been drawn on the progress of healthy life expectancy.
The noble Lord, Lord Whitty, asked whether people can work longer and what the trends are in the labour market. The SPA has remained at 65 for men since the 1940s and the average age of labour market exit in 1950 was just over 67 for men and just under 64 for women. That figure has declined, ironically, along with the nature of the work that we have been talking about—hard physical labour. We have seen a countertrend in what has happened since then.
I genuinely welcome this debate and believe that it is important to keep having these discussions, whether inside or outside the House. But we should not seek to prescribe every last detail in the Bill; we must make sure that each and every Government revisit the issue in the light of the circumstances. I urge the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
Despite being interrupted by a couple of votes, we have had an interesting, valuable and, I hope, important debate. I am very grateful to the number of noble Lords who have taken part in it, including those who had not expected to do so. I was certainly grateful to hear from the noble Lord, Lord Stoneham—not to be confused with the housing association called Stonham.
I am grateful to my noble friends Lord Whitty and Lady Drake for joining me in pressing the Government to put these provisions in the Bill, not to challenge where we are now but for future consideration, when we are thinking about raising the state pension age—and I cannot emphasise too strongly—so that we have a coherent policy across government. We need that, because, as pension credit is withdrawn, with every year that we equalise the state pension age between men and women, we reduce the income of men who are in their twilight and who have dropped out of the labour market early, as 30% or more have and do. That figure will increase as the pension age rises—that 30% will probably go up to 35% and 40%, and so on, as we raise the state pension age, unless we can keep people in the labour market for longer, as my noble friend says.
Lord Freud
Let me just make a point, before we take those figures absolutely on face value. When you have differential incentives—in other words, the point that the noble Baroness is making precisely, when you have a higher level of pension credit than working age benefit—you cannot be too surprised when people elect to go with the better paying structure. That probably tells you less than it could about what is happening to those people.
Baroness Hollis of Heigham
Oh, dear me. Are we assuming that somebody who has a real choice about whether to stay in work is going to make a rational decision to forgo a job that pays £400 a week to take an extra £30 or £40 or £50 in pension credit to top up an employment support allowance? Is that what the Minister is saying—that that person is so rational that he will willingly reduce his income to one-third of what it was because of the enticement of pension credit? Is that the Minister’s position?
Lord Freud
I was referring to the differential between the two benefit structures. I was not referring to enticement; I was just saying that one cannot be too surprised if people select the better of two options.
Baroness Hollis of Heigham
I think that I am right in saying that under 10%—probably about 7%—of those in that position do not choose to go on pension credit when that choice is available to them, and the rest do. So clearly the Government’s position assumes that people are making a choice that is attractive because they have been financially encouraged to do so by the relative generosity of pension credit. I cannot attach any other understanding to the Minister’s position. If pension credit did not exist, the assumption would be that the benefits structure was less attractive and therefore, presumably, that they would stay in work for longer—and that therefore they are being encouraged because of pension credit to leave earlier than they need to and that, therefore, withdrawing pension credit is a wise move in the process of the rationality of economic thought in the labour market. Is that what the Minister is saying?
Lord Freud
My Lords, I am saying that when you have a higher benefits structure, it is not surprising if people select it, other things being equal, over a lower one.
Baroness Hollis of Heigham
I think that the Minister and I have a very different understanding. My view is based on my experience representing—I do not know if the noble Lord has ever had that privilege—one of the poorest wards in my city for nearly 25 years. My noble friends here have either represented such wards or constituencies with very poor members and I can tell the Minister that if people can work they want to work. They want it for self-respect, for income, for social mobility and they regard going “on the club”, as it used to be called in my ward, or taking benefits as something that they are not proud of but reluctantly do because the labour market does not make appropriate provision for them, given the state either of their skills or their health. If that comes from experience of working with people, as I have done and as I am sure my noble friends have done, then I regret that the Minister cannot share that personal experience, which might give him a greater respect for the pressures that some people face in making decisions when they have to leave the labour market. I am not for a moment suggesting that he is lacking respect, but there is a great difference in perspective on this and I do not know that I can bridge it with the noble Lord.
It is certainly the case that, as pension credit is withdrawn, it will reduce the income of people who have already had to leave the labour market, usually on grounds of ill health, and as a result they will have less money for heating, diet and all the other things that we know they will need. People going onto pension credit are already effectively entering that second decade of disability without, in many cases, having gone through the first decade of reasonably healthy retirement. By withdrawing pension credit and putting no substitute in its place, we are ensuring that all we do is increase people’s poverty and thereby progressively increase the rate at which they go into further ill health, since they can no longer afford the heating, the diet, the aids and appliances, the cleaning help and all the rest of it which keeps them more effectively fit and engaged in society. Again, I am really disappointed in the Minister if he does not appreciate that.
Lord Freud
I cannot understand the difference between what the noble Baroness has just been talking about and what she was saying the other day when she was so indignant that men could get pension credit at women’s state pension age. She described it, if I remember right, as a smooth path to the beach before getting state pension.
Baroness Hollis of Heigham
Indeed so—I made the image up on the spot, but I will, indeed, repeat it. What I was arguing there was that women were facing a cliff edge. Men had always had that slow path to the beach, but that is now being withdrawn from them and as a result they have a cliff edge in the future between where they are, on benefits, and state pension. Unfortunately for the Minister, the argument continues to be made.
I do not think that any of us disagree, as my noble friend Lady Drake pointed out so well and as was reinforced by my noble friend Lady Sherlock, that we need to extend healthy life expectancy and that that requires health policies. We need to make the second decade of average life expectancy, of increasing disability, of as decent a quality as we possibly can. The noble Lord, Lord Stoneham, said that factors will change. Of course they will. The Minister said that factors will change, but the point is that that is already covered, as was pointed out by my noble friend Lord Browne, but the wording of Clause 26(1)(a) gives the Secretary of State alone the privilege of determining the other factors. Putting all these factors in the Bill, as listed in the White Paper, does not exclude other factors that may develop as time permits; it is a basis on which I would hope that the DWP has its arm strengthened as it engages in battles for resources with other departments and with the Treasury.
Does the Minister really think that he will have greater powers of persuasion to get those health policies that we would want to extend healthy life expectancy, or those supporting policies from local government or from the DCLG for the second decade if these factors are not in the Bill and if the Government are not bound by the legislative requirement to consider those factors? On the contrary; by putting those factors into the Bill we will strengthen the DWP’s arm in requiring other departments to play their part in seeking to extend healthy life expectancy and to improve the quality of the decade of disability. Without it, his position will be weaker, not stronger. The other factors, as my noble friend Lord Browne has reminded me, remain the same. I hope that this addresses the point made by the noble Lord, Lord Stoneham. We are absolutely right to challenge the assumption of reduced inequality.
My noble friend Lady Sherlock said that we are going to eat into capital. The point is that, for example, somebody who is in a position to draw down an occupational pension has a choice of when they retire and they are not dependent on their basic state pension. The people we are talking about in this Bill are, and they have no such choice. As my noble friend Lady Sherlock said, they will eat into their capital, thus ensuring an impoverished old age as they wait to reach their state pension age.
Lord Freud
My Lords, I start by acknowledging the expertise and experience of the noble Baroness, Lady Drake, as a member of the Pensions Commission, on which she was able to rest when she moved this debate.
The purpose of the review is to inform the Secretary of State. Its job would be to collect and analyse the latest data, compiling a report to give the Government of the day the information they need to make a decision. Of course, we are all keen that the Secretary of State receives a report that is both impartial and credible. We appreciate the attraction of a panel to ensure that a wide range of views are reflected in the compilation of the report. However, we have been clear that we do not think that prescribing a committee is the right way to go. We do not want to restrict future Governments by prescribing exactly what the review looks at and who is doing the looking. There is greater merit in allowing Governments to choose whether to appoint a single reviewer—as with the review of public service pensions by the noble Lord, Lord Hutton—or a larger commission, such as the Pensions Commission. Indeed, the latter, set up by the previous Government, was made up of three individuals, two from the worlds of academia and business, neither of which, incidentally, was mentioned in the amendment.
Both of those cases show that a legislative underpin is not required to set up a review that can win cross-party and wider public support and that there is no consensus on where is the best place to find the right people. We do not think that the proposal by the noble Baroness, Lady Drake, to set up a permanent commission—an NDPB or a standing commission, as she put it—is appropriate. That kind of structure is simply not necessary for a review that will come together and publish a report on a single issue, wide-ranging though it may be.
Baroness Hollis of Heigham
Is that so very different from the Low Pay Commission, which is also a single issue?
Lord Freud
The Low Pay Commission reports on a much more regular basis than the five years envisaged here. To pick up the timings that we have experienced, there is the example of Independent Public Service Pensions Commission. The noble Lord, Lord Hutton, was appointed in June 2010 and reported some nine months later, in March 2011. In the intervening period the noble Lord held two calls for evidence, undertook a research event, published an interim report and published his final report. It is clear that a lot can be done in the space of a year, and that is the kind of period that we imagine is about the right length of time required for a review.
NDPBs also tend to look at a wide variety of regularly changing data in the areas of longevity, healthy life expectancy, socioeconomic variations, trends in the labour market and so on, and they tend to be published on a much less regular basis than this. I want to be clear, though, that the groups indicated in Amendment 57A and many others should all be encouraged to participate and contribute in the process. Indeed, the review has been designed to ensure that both Parliament and stakeholders will have ample opportunity to participate in the process and shape the outcomes. Furthermore, because the reviews will be regular, stakeholders may indeed be able to better prepare and contribute than they are now.
Of course, if the Government decide to bring forward changes to the pension age, then those changes must be secured through primary legislation and subjected to the full scrutiny and approval of both Houses, as now. However, to have such extensive and political input at the data-gathering and analysis stage risks stymieing the process before information can even be provided to the Secretary of State. Indeed, the House of Commons Disqualification Act 1975 prevents MPs sitting on many public bodies, precisely in order to avoid politics influencing their work.
Regarding the publication of this report, subsection (6) of this clause requires all reports prepared under the clause to be published. This means that both the Government Actuary and the report from the independently led review, including any recommendations that that component of the review makes, will be published, so all the evidence that has been taken will be made available. Every report will be laid in Parliament and published, including the report from the Secretary of State. As I said before, any proposed changes will require primary legislation.
It is for the Government of the day to put forward proposals resulting from the reports and to present any legislation to Parliament. Responsibility for publishing any overall report on the outcome of the review therefore has to remain with the Secretary of State. I hope that I have been able to provide some reassurance about how we envisage the review working and why. In this case, less is more. I urge the noble Baroness to withdraw the amendment.