Terminal Illness: Early Access to Pensions

Drew Hendry Excerpts

Tuesday 2nd May 2023 Westminster Hall

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I wish that more Members had attended this very important debate so that I could sum up some more contributions, but I thank my hon. Friend the Member for Angus (Dave Doogan) for securing it and delivering a powerful speech in which he entreated the UK Government to act with compassion. It is vital that terminally ill people are finally given the respect they deserve in UK Government circles.

When terminally ill people get their diagnosis, they are absolutely devastated, and so are their families. It is a situation that none of us wants to face, and nor do we want members of our family to face it. It is absolutely devastating, and grief kicks in immediately. That is just one of the pressures facing terminally ill people and their families, which my hon. Friend laid out.

[Margaret Ferrier]

Terminal illness puts an emotional, mental and financial strain on the individual and their family. More than four in five families living with advanced cancer face income losses as a result. Does the hon. Gentleman agree that allowing early access to pensions will enable people with terminal illness and their families to focus on the quality of their end-of-life experience and not worry about money?

[Drew Hendry]

The hon. Lady is absolutely right. This should be about making the people who are facing this most dreadful situation and their families as comfortable as possible and helping them to move forward. The cost is small, although as my hon. Friend the Member for Angus said, by not paying out the £144 million a year, the UK Government are running a lottery; they hope to get that dividend in from people. That is a small amount for dignity and fairness for the people in that situation and their families.

My hon. Friend shared the damning statistic that terminally ill people are twice as likely as others to die in poverty. They have bigger costs; it costs more to be terminally ill. For a start, they are ill, and most are homebound, which increases energy costs. There is the cost of the adaptations that they have to make, and increased costs for their families, who have to visit more to provide support.

The issue should be very simple for the UK Government. I am chair of the all-party parliamentary group for terminal illness, and although our entreaties about the six-month rule were listened to—on every occasion, Ministers said, “Yes, we must do something about this”—the change to 12 months took years in which thousands of people died waiting. I welcomed the change from six months to 12 months because it made life marginally more easy for people, but the fact that the effect is marginal—the very minimum that could be done for terminally ill people—is the most damning thing about this. As has been stated, this is about fairness and dignity, and people’s ability to have a quality end of life. The power is with the UK Government to make a very simple and fair adjustment. As has been underlined, in the scale of things, the cost is small, but the scale of the impact on the lives of people who are terminally ill and their families is enormous.

Nobody is asking for things that people have not earned; these pensions are something that people have earned throughout their lives. The Government can look at it this way: when someone gets that devastating note that says they are terminally ill, the Government know they will save money from the fact that that person is not going to be around for years collecting their state pension. Therefore, the Government can at least make this gesture towards making people’s lives easier. Why do we not see more compassion from the UK Government over this very simple matter? People are dying; why not treat them the way they should be treated? Why not strain every sinew and make every move to ensure that people in this situation have the best possible end of life? It is one thing that all of us could achieve by working together, and that the UK Government could commit to.

We heard about the tragedy of Mr Bain, a constituent of my hon. Friend the Member for Angus, who spent 41 years paying into his pension. He earned it but he is not going to get it. Think of my hon. Friend’s other constituent, Malcolm, who is quoted as saying when his diagnosis of cancer came in, “You immediately think you are going to die.” Of course he thought that, with that diagnosis. People are going to die; the problem is that, with the best will in the world, doctors cannot put a definitive timescale on when. However, they can often say that, “You are going to degenerate and your life is going to get more difficult as you go towards the end of life.”

This is a simple act. State pensions are reserved to the UK Government, so only they can act on this for people in Scotland and the other nations of the UK. Other nations can, as we have heard, make provisions like this; they can do the right thing for people. My hon. Friend the Member for Angus laid it out very clearly, but I will say it again: this is not a mammoth choice, and it is not going to destroy the UK budget. It is a small step that, along with other measures, should be taken to assist people who are terminally ill and their families.

When the Minister sums up the debate and answers our questions, I ask her not to just give out platitudes and promises of long-term action, as we have heard so many times before from so many other Ministers in the UK Government. I am not saying she will do that, but I believe the debate deserves answers on how she will take the issue back to her Department and work out a proper plan for people who are terminally ill and their families, so they can have the dignity, respect and fairness they deserve. She can give a reassurance that she will fight tooth and nail to get state pensions released for people who are terminally ill.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)]

It is a pleasure to serve under your chairmanship, Mr Sharma. We have been discussing a very sensitive issue, and I thank the hon. Member for Angus (Dave Doogan) for bringing forward the debate, and all hon. Members for their contributions.

The Government remain committed to ensuring that all citizens can live with the dignity and respect they deserve. I think it would help if I first set out the principles behind the state pension, which is the foundation of state support for older people. In 2016, the system was reformed, with the introduction of the new, simpler and more straightforward state pension as the basis for private saving, to which people can add throughout their lives.

The state pension is a contributory social benefit, financed through the national insurance fund. The national insurance system operates on a pay-as-you-go basis, meaning that today’s contributors are paying for today’s social security entitlements and pensions, while those who paid contributions in the past were paying for the pensions of that time. In other words, the contributors to the national insurance system do not accumulate an individual pot of money that is personal to them.

People’s national insurance contributions do not just pay for the state pension. They also entitle them—or, in certain circumstances, their spouses—to contributory social security benefits such as unemployment and bereavement benefits, which are available on the basis of the rules applicable at the time the claim is made, and about 20% of national insurance contributions are paid into the NHS. Therefore, it is a question not so much of a person paying for their own benefits, but of a general pooling of resources to meet current benefit claims for all those covered by the national insurance system.

A person’s contributions are geared towards liability to pay rather than any likelihood of future benefit entitlement. In that sense, it is similar to income tax rather than a private insurance or pension scheme. It has always been an overriding principle of the national insurance system that liability to contribute exists, whether or not those contributions will eventually give entitlement to a particular benefit. That is very different from private pensions, where a person builds up a pool that is specifically theirs, and where different laws rightly exist.

Therefore, early access to a state pension would not be appropriate in the case of terminally ill people, but there are a variety of other benefits available to them. For those nearing the end of their life, significant support is already available through the welfare system. Hearing that an illness cannot be cured must be a frightening and devastating experience, and I pay tribute to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for all his work on that with the APPG. Our priority within the DWP is providing people with financial support quickly and compassionately. The main way we do that is through the special benefit rules, which have been mentioned today and which are sometimes referred to as the special rules. They give people nearing the end of their life faster and easier access to certain benefits, without their needing to attend a medical assessment or serve waiting periods. In most cases, people will receive the highest rate of benefit.

Changes to the special rules mean that thousands of people nearing the end of their life will be able to claim fast-tracked financial support from the benefits system six months earlier than they were able to previously. Historically, people had to be assessed by their healthcare professional as having six months or less to live. That is known as the six-month rule, which the hon. Member for Inverness, Nairn, Badenoch and Strathspey referred to. In July 2021, the Government announced that they intended to replace the six-month criteria with a 12-month, end-of-life approach. Last April, the Department made those changes to the special rules for eligibility for universal credit and employment and support allowance. In April 2023, the Department made similar changes for PIP, disability living allowance and attendance allowance. Those changes have been welcomed—as they have been today—by the key charities active in the area, by the public and by parliamentarians.

I will now expand on my earlier remarks on early access to state pension. Unlike a personal or workplace pension, which can potentially be drawn earlier, it has always been the case that nobody can claim their state pension before they reach state pension age. There are a wide range of working-age benefits available to support people who are below state pension age . Removing the clear boundaries between working-age and pensioner benefits would create complexity and confusion. This is not simply a monetary issue.

As an example of the complex issues relating to early access, the value of an individual’s state pension is based on their contribution record. Is the intention here to base it on the contribution record of those who are, sadly, at the heart of today’s debate? If the value of that state pension, based on the person’s record, is deficient, would they be entitled to means-tested pension credit? If they took their state pension early, would it need to be actuarially reduced to reflect that? Early access actually means lowering the age of entitlement to state pension. At what age would it be set for this group? Would it be 16, in line with the age—

[Drew Hendry]

I appreciate the Minister’s position, but I am not sure that many people who are terminally ill, or those who work with them, will be comforted by the technicalities she is laying out. She is laying out the rules as they stand, but does she see no opportunity for things to be adjusted so that the entitlement age for those who are terminally ill could be adjusted, as it is in other countries? Is there no opportunity or intention for the UK Government to look at that?

[Laura Trott]

The Department’s position is that help is available through benefits other than the state pension. The state pension is not an entitlement pool that exists; it is done on a pay-as-you-go basis. Of course, it is different from private pensions, which I will come to in a second, and there is more that we could do on that front to make the situation easier and more straightforward.

I of course accept the sentiment on which this proposal is based—that those who are terminally ill should be financially supported—but grounding this support on the state pension system, because it is there, does not make for a practical proposition, and that is in addition to my earlier points on the nature of the state pension.

Hon. Members will be aware that the second Government review of state pension age was published on 30 March 2023. The Government noted the independent report’s recommendations on the rise from 67 to 68, but highlighted that Baroness Neville-Rolfe was unable to take into account the long-term impact of recent significant external factors, bringing uncertainty to the data on life expectancy, the economic position and labour market.

I raise that point because, as part of that process, independent reviewers looked at early-access policies that would allow variation in state pension age for certain groups. John Cridland covered that in his 2017 independent review of state pension age. More recently, Baroness Neville-Rolfe, in her independent review, recommended that the Government should look at such a scheme for people who had spent long periods of their lives doing physical work.

However, both reviewers recognised the real, practical difficulties of designing and delivering such a scheme. We are aware that when and why people leave the labour market will vary and will be affected by a host of factors, including their national insurance record, savings, health, caring responsibilities and other factors. It would be impossible to take account of all those factors in setting the state pension age or to create rules for one particular group that would be fair to others. In addition, the Government are mindful of the fact that a universal state pension age has many benefits, including giving a clear signal to those planning for retirement.

Private pensions are very different. Through automatic enrolment, we have extended pension saving, so more individuals will have access to choices at retirement, with more than 10.8 million people automatically enrolled into a workplace pension as of March 2023. If someone has a defined benefit private or workplace pension, they may be able to begin taking an income and/or lump sums from their pension at any age due to ill health. That provision is dependent on the rules of the scheme.

In addition, the generous tax benefits of saving into a defined contribution pension provide individuals with the ability to accrue savings for their retirement and provide them with freedom and choice about how they access them. Individuals can normally access those savings, without penalty, from age 55. However, to address the point made by the shadow Minister, the hon. Member for Reading East (Matt Rodda), they may be able to access their pension as a lump sum from any age if the scheme administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) raised a specific example of where there were difficulties. I would be grateful if she would write to me about that, and we can see whether there is anything we can do to help.

The hon. Member for Reading East raised some points on energy. The energy price guarantee has been extended for an additional three months at its current level, from April to the end of June. That will bring a typical household energy bill for dual-fuel gas and electricity down to around £2,500 per year in Great Britain and around £2,109 per year in Northern Ireland.

In conclusion, I have set out the range of support that the Government provide for people with terminal illnesses. Although I of course have the greatest sympathy for anyone in that position, the Government do not believe that adjusting the state pension system to support that group is the right approach, although early access to private pensions is obviously a different matter.

--- Later in debate ---

[Dave Doogan]

Thank you very much, Mr Sharma. I thank all hon. Members for their contributions to this important discussion. I am disappointed, if I am honest, that so much of the oxygen in the room has been devoted to private pensions. There is a fundamental—and, dare I say it, fundamentally clear—distinction to make between private pensions and state pensions. People in the workplace have a choice over whether to take out a private pension or not; they do not have a choice over whether to pay their national insurance contributions. I would suggest—respectfully—that that is a fundamental, fairly obvious difference between private and state pensions.

In her summing up, the Minister talked about the pay-as-you-go nature of national insurance contributions. I think that most of us, as Members of Parliament, already understand that there is no national insurance pot and that national insurance is, in effect, a distinct version of general taxation.

[Drew Hendry]

My hon. Friend is making a point about the state pension and the mechanics that have been described. However, this situation—where there is no specific pot—is the same in other countries, such as Australia and Canada, which do allow early access to the state pension. There is no difference in the mechanism for it, or indeed the principle behind it; they have just applied the compassion that is missing in this situation. Does my hon. Friend not agree?