Pensions Bill [HL]

Baroness Turner of Camden Excerpts

Tuesday 15th February 2011 Lords Chamber

[Baroness Turner of Camden]

After that, another Pensions Bill. This time it follows legislation on pensions provision introduced by the previous Labour Government. In passing, I congratulate my noble friend Lady Drake for the way in which she introduced the debate. I support much of the new Bill, but I will draw attention to a few points.

The new Bill makes provision for auto-enrolment into the National Employment Savings Trust. The requirement for compulsory employer contributions and auto-enrolment into either NEST or an existing good-quality employer-provided pension is very important. Millions of people will for the first time save for a pension. That is a very good development.

The first part of the Bill deals with the state pension and state pension ages. It introduces equalisation for men and women. This was expected, as was the increase in the retirement age. The timetable set out in the Pensions Act 2007 was between 2024 and 2026. In the Bill, the timescale has been brought forward. For women, the SPA will reach 65 by November 2018 and 66 by April 2020. There will be equalisation for the sexes. A number of noble Lords have already drawn attention to the difficulty and unfairness that might be imposed by this arrangement on women born in 1954. I hope that their comments will be taken on board by the Minister.

Increasing the pension age will affect poorer people most, since they are much more likely to rely solely on the state pension. Those who are better off will have other resources such as an occupational pension or other means and will not be much concerned about the state pension age.

Of course, many people want to continue working after the current retirement age. They will include many—mostly men—who have jobs in which they are deeply interested. That is fine, but not all jobs are the same. It is in no one's interest for older workers to continue in employment that is physically demanding: construction is one such industry. It might not even be safe to continue employing older workers in such work. Retirement would be better, unless lighter work could be found. Many women who have done heavy, uninteresting and exhausting work will not welcome the idea of having to work until 66 before they get their state pension. There is a case for flexibility.

There may also be some disadvantage for disabled people, since the Bill indicates that their entitlement will be based on pensionable age and, under the new arrangement, that will be much later. I am sure that nobody would want to disadvantage disabled people through changes in the pensionable age.

Last year, the Government announced the triple guarantee to increase the basic state pension by the highest figure of earnings, prices or 2.5 per cent. This is very welcome, although not quite as good as it appears. For many years I have urged that the state pension should be increased in line with the wages index. My late friend Lady Castle was indefatigable in her campaign for this, but we did not succeed. Had it been introduced many years ago, pensioners would be much better off now. The wages index now is relatively flat; in fact, many wages are going down rather than up. Moreover, the Government are using the consumer prices index rather than the retail prices index as their chosen measure. It does not include housing and a number of other items, and produces a much lower amount. Over the years, provided that the economy improves, the wages index may produce higher figures, so I hope that pensioners may profit in future. However, they will not profit much now, particularly since the rise in inflation is having a dire effect on many household incomes.

The second part of the Bill relates to auto-enrolment, which, as I said, I welcome. However, I do not know why there should be an optional waiting period of up to three months before an employee must be enrolled automatically into a workplace pension. Employers must make sure that employees know from day one that they have a right to enrol and to receive the employer's contribution.

I am not sure about arrangements for transfers in and out of NEST. Many people in a working life could build up an entitlement to a number of pension pots. Is it intended that it will be possible to make arrangements for transfers in and out of NEST? Employers’ contributions are rightly regarded by employees as part of a deferred salary package, and it should be wrong for employers to have the right to reclaim them.

Returning to the question of indexation, the Government have unilaterally decided that CPI should be applied rather than the retail prices index in regard not only to the basic state pension but to the state second pension, public service pensions, many occupational pensions, pension protection compensation payments and the financial assistance scheme. I understand that it cannot apply to private occupational pensions if increases in line with the retail prices index are covered by contract. However, everyone else is likely to lose out and that does seem very unfair. I understand that certain public sector employees have already been advised that that is on the cards and that their future increases will be in line with the CPI. My sister, who is a retired teacher, has told me that she has already received a notification to that effect regarding her pension. Why should employees, through no fault of their own, lose accrued pension rights? I hope that the Government will be persuaded to reconsider this.

Therefore, there are issues which could be pursued further in Committee but there is much to welcome in the new Bill—particularly the arrangements for auto-enrolment. As everyone knows, we have an ageing population, as has been referred to by everyone who has spoken in the debate. It is vital, however, that resources are available for people’s final years to be spent in dignity and without the fear of grinding poverty, which has been the fate of many working people in previous generations.