Gender Pension Gap

Guy Opperman Excerpts

Monday 19th April 2021 Commons Chamber

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

It is my mission as pensions Minister to make the UK pensions system safer, better and greener. We are doing that in a variety of ways, ranging from our world-leading climate change and environmental, social and governance reforms, which positively impact pension investments, to taking tough action on scams and unscrupulous bosses, and through our work to make pensions simpler and more easily understood with dashboards, and to tackle inequality.

I congratulate the hon. Member for North Ayrshire and Arran (Patricia Gibson) on securing this important debate. This Government, like previous Governments, recognise that this is an important issue—one that we remain committed to addressing. It is one of the key drivers of the automatic enrolment reforms and the 2016 new state pension reforms, both of which help to address the issue raised. Through automatic enrolment and the new state pension, we are enabling more women to build up pension provision in their own right, reducing historical inequalities in the pension system.

With respect to the hon. Lady, I submit that automatic enrolment has been a genuine game changer in workplace savings. It has happened over the past nine years, but the work has been done by successive Governments, including a Labour Government, who set up the Turner commission. Automatic enrolment was commenced by the coalition Government in 2012, before the original blueprint was fully rolled out by this Conservative Government in 2018-19. Savings of 8% are now the norm, and 10.5 million employees have been automatically enrolled by more than 1 million employers.

Overall workplace pension participation for eligible employees has increased by 44 percentage points since 2012, reaching 86% in 2019. It has been especially transformative for women, low earners and young people, who have historically been poorly served by or excluded from workplace pensions. The proportion of women participating in a workplace pension reached 86% in 2019, which is double what it was in 2012. Some 79% of low earners now save into a workplace pension, which is more than double what it was in 2012. Finally, 85% of young people now save into a workplace pension, which, again, is well over double what it was in 2012.

[David Linden]

I do not think anybody in this House would quibble with the fact that automatic enrolment has been a success story, but the point outlined by my hon. Friend the Member for North Ayrshire and Arran is that the £10,000 trigger in place discriminates against women. Why do the Government have such an objection to making sure that the trigger kicks in at the first pound, rather than waiting until £10,000, which is so disadvantageous to women?

[Guy Opperman]

I am grateful to the hon. Gentleman for raising that point, because I am coming to that specific issue. He will be aware that we conducted a review of automatic enrolment and that we are committed to implementing its findings by the mid-2020s. We intend to remove the lower earnings limit, which will benefit low earners, and for the first time everyone will get an employer contribution from their very first pound of earnings if they are enrolled or opt in. That will improve the incentive to save, especially for women and those individuals working part-time in multiple jobs. In addition, the review also proposed extending eligibility to those aged 18, which will support younger people with the opportunity to start saving earlier for a more secure retirement. Clearly, there is a benefit in the hon. Gentleman’s constituency. In the constituency of the hon. Member for Strangford (Jim Shannon), for example, 7,000 people are currently automatically enrolled, and thanks are due to the thousands of employers who are supporting them in that process.

[Patricia Gibson]

While the Minister is talking about auto-enrolment, will he say whether he has any concerns about the issue I outlined about the employer using the net pay basis, instead of the relief at source scheme, so that tax relief can be earned?

[Guy Opperman]

The hon. Lady raised the RAS—relief at source—issue, which is a legitimate one. It is a matter governed by the Treasury. Obviously, I speak for all the Government, so I can try to address that point. She may have missed it, but in the Budget the Government announced a call for evidence on pensions tax relief administration, in line with the Conservative Government’s manifesto commitment to review comprehensively relief at source tax arrangements. The call for evidence is now closed and the Treasury is continuing to analyse the responses to it. The Treasury will, in the usual way, respond and publish its response shortly. Although the hon. Lady legitimately and rightly raises a matter that, to be fair, is also in the Conservative party manifesto as an issue to be addressed, the Treasury is addressing and has the matter in hand.

I will briefly touch on the very important issue of the self-employed. We remain committed to developing effective, durable retirement solutions for the self-employed. We commenced trialling a research programme in 2019-20 to test differing approaches aimed at improving retirement savings for self-employed people, looking at the role of behavioural messages and saving mechanisms using financial digital platforms. Some of those trials were paused during the covid pandemic for obvious reasons, but the work is done such that we hope to recommence trials this summer. We are also specifically working with Her Majesty’s Revenue and Customs to incorporate self-employed pension solutions into the Making Tax Digital programme that HMRC is rolling out, which I believe will genuinely assist the issue in relation to the self-employed.

Turning to the desire to make pensions simpler, more understandable and more practical, we are taking several measures to address that. In particular, the House will be aware of the pensions dashboard, which we took through in the Pension Schemes Act 2021. We are also driving forward the two-page annual pensions benefit statement, which will take the dozens of pages that were very hard to comprehend and make them into a simple two-page statement. We believe simplicity is key. We want all savers to be easily able to understand their pensions savings, so they can plan for the retirement they want. We believe that communications should be designed with savers’ needs in mind to encourage such engagement. Effective engagement will require a continued partnership between the various providers—the Government, the advisory community and the savers in the longer term.

I also want to outline to the House—I believe it is relevant to this debate—the pilot projects that we are conducting up and down the country on the midlife MOT. This builds on the work of the private sector, in particular Aviva and others, looking particularly at interventions between the ages of 45 to 50. Effectively, it is looking at wealth, work and wellbeing. We have committed several hundred thousand pounds to a number of pilot projects from Cornwall to the north-east and all across the country to ensure that there is a piloting of particular interventions to try to get people engaged with their pensions at an earlier stage and to see whether real differences can be made. I thank the Financial Conduct Authority for meeting me on this issue today as we try to drive forward this innovative change.

The hon. Lady also raised the state pension and a number of issues in respect of it. She will be aware that the state pension has never been higher in this country. When we came into government, it was barely £66 billion in 2009-10. It is now approximately £100 billion-plus. There is a well over £1,000 real-terms increase by reason of the triple lock. Clearly, pension credit has increased as well. She will also be aware that our reforms have seen the gap reduced between the state pensions of men and women. The new state pension system, introduced by one of my predecessors, corrects some of the historic inequalities of the previous system. Over 3 million women stand to receive an average of £550 more per year by 2030. The state pension outcomes are expected to equalise more than a decade earlier than they would have under the old system. We believe that the new state pension, introduced from 2016, gives equal value to national insurance contributions and credits, providing access to the same level of entitlement for all. There is also a comprehensive framework of credits available when people are out of the workforce, for example caring for children or elderly relatives. This will protect people’s state pension position for those periods.

We have introduced the “Check your state pension forecast” service, which I strongly recommend. There is also a desire for everyone to find out whether filling any gaps will increase their payments when they reach state pension age. In particular, that should be done in respect of gaps since 2016, because filling in the gaps, by either receiving credits or making voluntary national insurance contributions, could increase state pension.

The hon. Lady raised a number of additional points that I want to try to address. She raised the campaign on the women’s state pension age increase. Clearly, these were decisions made in the early 1990s and then legislated for, fundamentally on grounds of equality, in 1995. The notice period, I suggest, was several decades. Whatever the hon. Lady’s views or mine, this matter was then taken to the courts, and both the High Court and the Court of Appeal rejected all legal claims of the state pension age campaigners comprehensively, in highly detailed judgments.

This Government, at the same time, have raised the living wage, increased the personal allowance to £12,570, introduced free childcare, introduced the returners programme and addressed shared parental leave, and spent record sums already on universal credit, disability support and, as I say, state pension.

I thank all hon. Members for participating in this debate and showing a clear passion for improving pension outcomes for women. I believe that this Government and previous Governments have made progress. I accept that there is more to do and that closing the gender pension gap remains a priority for all.

Question put and agreed to.