Public Service Pensions Bill

Gregg McClymont Excerpts

Tuesday 4th December 2012 Commons Chamber

[Sajid Javid]

My hon. Friend is absolutely right—the change to which she refers had a dramatically negative impact on private sector pensions.

The benefit structure of many existing schemes has led to benefits being disproportionately directed towards higher earners.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

Further to the point made by the hon. Member for South Northamptonshire (Andrea Leadsom) on previous Governments, is the Minister aware that the previous Conservative Government’s decision to ensure that employers could no longer mandate their employees to be in occupational schemes had one of the single biggest impacts on the quality of occupational pensions in the round in this country? The Thatcher Government put that measure through in the 1980s.

[Sajid Javid]

The hon. Gentleman will know that this Government have introduced changes to private sector pensions that will help to increase take-up. I am glad that he has raised the policies of previous Governments, because I was about to come on to them.

Belated changes by the previous Government in the previous decade exacerbated the unequal treatment of members within schemes by introducing reforms that only applied to those who joined from a given date. Those same belated and limited changes also sought to limit costs increasing further in the future. It has often been stated—without foundation, I may add—that those reforms were sufficient to return public pensions to a sustainable footing. They were not. The reforms did not address the historic increases in the cost of providing public service pensions that had taken place in the preceding decades. Instead, they provided for any further increases from that point to be shared between employees and employers. That was simply not enough, and is why Lord Hutton concluded that the status quo is not tenable. His report states:

“Future costs are inherently uncertain”

and that

“the general public cannot be sure that schemes will remain sustainable in the future.”

Through the Bill, our reforms to public service pensions will make a difference. Through the framework we have set out, we will ensure that public service workers get a good quality pension that is among the very best available. Members will continue to receive guaranteed benefits with no exposure to investment risk or fluctuating annuity rates, unlike in many private sector schemes. We will also ensure that the taxpayer gets a fair deal by rebalancing the costs between the beneficiaries and other taxpayers, and by capping their contribution to the schemes, so that costs cannot again spiral out of control.

Until now, pensions have failed to keep pace with changes in longevity. This is without doubt the single greatest risk to the affordability of schemes in the future. The Bill will ensure that members continue to receive defined benefit pensions, and we will ensure that longevity changes are managed by linking scheme retirement ages to the state pension age.

--- Later in debate ---

[Gregg McClymont]

I want to make a couple of points about pensions in the round as we come to the end of the debate. We are talking about public sector pensions, but it is worth remembering that our state pension is one of the lowest in Europe; the replacement rate it provides is very low by European standards, so we cannot talk about public sector pensions on their own in that context.

Equally, we have to be very careful that we do not get into a race to the bottom in respect of private sector pensions. There are real problems with private provision in the UK—not caused, of course, by the previous Government. I had to laugh at some of the contributions from Government Members. The single biggest negative impact on private sector pensions in the UK was the Thatcher Government’s removal of employers’ ability to mandate the work force to be in an occupational pension scheme. That was the beginning of the slippery slope, alongside holidays in pension contributions taken by employers. This rewriting of history by Government Members is ludicrous.