Pensions Bill [HL]

Lord Boswell of Aynho Excerpts

Tuesday 15th February 2011 Lords Chamber

[Lord Boswell of Aynho]

My Lords, the House has just heard, with great interest and respect, two most distinguished contributions by well known lawyers on the role of the judiciary and the Bill’s impact on it. We will shortly hear from a third distinguished lawyer on the matter. I am sure noble Lords will be relieved if I say that I have neither the competence nor the temerity to engage in this argument. We have also heard from my noble friend Lord Brooke of Sutton Mandeville, who was kind enough to support me on my introduction to this House last year. He lightened the tone in the most splendid manner. It made me think that in an effort to build consensus across the coalition, if not across the House, on what is essentially a rather consensual Bill, I should declare a past interest in that my father did know Lloyd George, although they were never of the same party.

Having said that, I was reviewing, as one should, my declarations of interests. The primary one, which I do not think I have heard from anyone else, is that I am a state pensioner. This means that my wife, who is in a similar position, and I are now immune to most of the measures in the Bill. We have passed the gateway. But perhaps more materially, I am also a trustee of the Conservative and Unionist Agents’ Superannuation Fund.

Beyond that, it might be of interest to the House if I throw in the fact that at one stage in another place I handled the Front Bench brief in relation to the initial pension credit legislation. However, I find it sobering—this is germane to the case—that with the complexity of the system which we now face, even given that measure of experience, when it came to the fine points of my own state retirement pension statement I was completely unable to interpret what it actually meant. I knew something about graduated contributions but it was only this week in connection with a new statement of my entitlement for next year, and with reference to Clause 2 of the Bill, that I discovered that I had a PUCODI that I never realised I had. I am delighted to say—it is a matter of a few pence—that it will continue in the future.

I welcome the Bill—strategically, if not in every respect—in that it addresses three needs. First, it addresses the need to control the deficit, although, significantly, it will not do so initially, and not even within the period of the commitment in the coalition agreement to control it. However, it will build up to effect very significant budget savings of the order of £30 billion directly, plus tax and national insurance contributions of a further £8.5 billion over a decade. Those savings are some way away but are very significant indeed. Secondly, it begins to respond to the inexorable demographic process of an ageing but increasingly viable population with a rapid increase in life expectancy which has shaken every actuarial calculation. Remarkably, at the beginning of my political career, there were about 8 million pensioners but we are starting to talk in terms of having 14 million or 15 million within the lifetime of many of us in this House. Thirdly—this is rather qualified praise—the Bill effects some simplification in what I have already indicated is an overcomplex and unintelligible system for the lay person.

As judicial pensions have just been touched on, I shall say no more about them. I do not intend to say a great deal about the arrangements for auto-enrolment although I am pleased that they have been widely welcomed. However, although we are nearly there, some aspects of the technical alignment of this—for example, some submissions I have seen from the British Chambers of Commerce—are entirely proper matters for discussion in Committee. Another area that concerns me—although I am not saying that we should reverse this into one of the functions of NEST, which has a great deal to do—is the whole question of small pots—which I find very vexing—which have been left behind for individuals, particularly but not exclusively for women. I am aware of one in my family worth £20 of pension per annum and another worth about £35 of pension per annum. They cannot be removed on the ground of triviality as that is being claimed somewhere else but they are very untidy and the administrative costs are unconscionable. We must hope that we will return to that issue in the future. What we are doing with NEST—though it will not always be easy and will introduce a burden for employers, including some smaller employers—is broadly sensible in view of the objectives of securing greater savings and availability which the Bill sets out.

I remember from my early days in the pension credit world, to which I have referred, the moral hazard of encouraging people of modest means to save when any benefit from their deferred gratification may be matched, or even overcome, by the opportunities available—these are not related to their own saving—through means-tested pension credit. That destroys the moral basis for their contribution and may give rise to legal challenge later on. That is why I am attracted by the ideas that have been touched on in the debate, particularly by the noble Lord, Lord German, and have certainly been sketched in the press, that something should be done to consolidate the state pension at a higher actual level. Moving to a higher minimum level would provide a platform on which people’s full NEST-directed or other-directed savings could build, rather than being subverted by a means-testing system.

However, the meat of the Bill in financial and policy terms lies in Part 1 on the state pension. We know that life expectancy is increasing even faster than the assumptions of the timetable of the 2007 Act. Even allowing for a completed move to 66 for everyone, within 20 years there may be another 2.5 million pensioners. Any Government would have to address this, even if the budgetary situation were better than it is today. I therefore support the principle of bringing forward changes to the state pension age. On fairness, we need to recognise the interests of those in the active labour market—taxpayers who have to fund these pensions when they are paid—and the overall gender balance effect. These issues have been touched on.

That is not to say that there are not concerns—I share those concerns—about problems, particularly for a number of women in this transitional phase. It is simply unrealistic to pretend that any move to accelerate the system could be painless. However, we need to recognise—many of us across parties have campaigned on this for years—that the position of women in the pension system has generally been difficult. In fact, we have only just achieved 30-year entitlement. One or two cases of particular stress have been referred to—for example, women who have attained the age of 60, or will have done, who then discover that their pension is moving from them, rather like the fruit in the old parable whereby you never quite get there. I hope that in Committee we can look at some of the most direct effects, particularly on people who are seriously ill, to see whether something can appropriately be done about them. I recognise that cost is a real constraint. Trying to say that we have a problem that we will meet in full would nullify the Bill.

Another constraint which has not much been touched on in the debate is the jurisdiction of the European Court in relation to potential discrimination. Although I would not wish it to do so, the court will look seriously at the issue of not aggravating a gender imbalance. However, I should like Ministers to consider whether they could meet at least part of the cost by transferring the balance from the female gender to the male gender and making an earlier start on moving the male pension age up towards 66 before 2018. In order not to destroy the principle in Europe, this could be done by ensuring that there was a progressive reduction in the differential between the male and female pension ages—that is, the female rate of withdrawal or of moving the contribution qualifying age would always be faster than that of males. That would be a reasonable package to put to the Europeans, saying, “We have a problem. It is an historic one. We also have an overall financial problem. Can we consider doing something slowly about the male approximation to 66, to which we know, as part of our programme, the female age would approximate in due course?”. Such a proposal would be reasonable if it helped to provide some resources for the burden sharing.

The overall message from this debate is that pension legislation is complex and potentially expensive and savings are not easy to get and have to be thought about well in advance. Somewhere along the way—although, as I have indicated, I am no lawyer—the words “reasonable expectations” chime in on this. However, I congratulate the Government on the concept behind their Bill and I look forward, because the devil is in the detail, to its detailed, objective and, on the whole, broadly consensual consideration.