Pensions Bill [HL]

Lord Boswell of Aynho Excerpts

Wednesday 30th March 2011 Lords Chamber

[Lord Boswell of Aynho]

My Lords, perhaps I may respond briefly to this amendment, having spoken on these matters in Committee. It provides a convenient opportunity to differentiate comments that I might make on this amendment from those that I might make on a subsequent amendment in the name of the noble Baroness, Lady Greengross, on the impact on women. I have felt on reflection since I considered the exchanges in Committee that there is an increasing, and I think more intensely felt, acceptance on my part that we have to get on with this and therefore, in order to raise money, accelerate the equalisation of the state pension age. Because of the doctrines that we have on equal treatment, it is only at that point that we are able to effect an increase in the overall unisex state retirement age towards 66 and perhaps at a later stage further in the way that the noble Lord, Lord McKenzie, reasonably accepted.

We know that we have to get on with this and that we have to wrestle with longevity, which has already knocked sideways the assessments under the Pensions Act 2007. While I am aware that we are not discussing private pensions in this part of the Bill, I happened to see some figures the other day on the universities superannuation scheme that totally struck me. They suggested that since 1973 the average pension age has gone up by 13 years. We are not dealing with a static situation; we are dealing with a rapidly exploding situation in people’s state and, where they have them, private pension entitlements on account of longevity.

Therefore, again as the noble Lord very reasonably said, this raises some interesting and rather intense issues about intergenerational transfers. Either we can redistribute this—we might both perhaps wish to return to that in a later group—or we have to consider pushing some of the burden on to today’s working population and taxpayers. It is perfectly true that none of these amendments—even on the Government’s proposed timescale towards equalisation, which I accept is rather rapid—cuts into the present deficit reduction programme, the present Parliament or the immediate outcome of dealing with the crisis.

Nevertheless, we have this inexorable march forward. If we do not do something about it now, particularly if we are anxious to give the maximum possible notice, it will not be possible to tackle the pensions problem before it overwhelms us. The only people who could end up paying for this are our children and our grandchildren through their taxes because of the pay-as-you-go system. We have to grasp the nettle now.

I do know—I was rather appalled at the estimates of costs in Committee—that the noble Lord’s amendment would cost some £10 billion a year. It is a small proportion of the savings which the Government have set out in their indication of the savings. The noble Lord is shaking his head.

[Lord McKenzie of Luton]

I am sorry to interrupt the noble Lord, but it is not £10 billion a year; it is a net present value figure spread over five or six years.

[Lord Boswell of Aynho]

The noble Lord is entirely right to correct me. I had added the words “per annum”, which are not in the calculations. However, it is still a very substantial sum, and I do not think that Governments at the present juncture can forgo that. To put it another way, they would have to find an alternative means of financing even proposals that I put forward in Committee, which we may touch on later. Those were alleged to be likely to cost £7 billion, which, frankly, is rather more than I had anticipated or indeed would be sustainable. We are into a difficult calculation, but we cannot, in the circumstances of longevity, responsibly countenance the noble Lord’s amendment as it is at the moment. However, if for some reason the figures are not as pessimistic as we thought, I would very much like to hear my noble friend’s response when the time comes.

[The Lord Bishop of Ripon and Leeds]

My Lords, I have put my name to these amendments because I want to talk about the speed with which the goalposts are being moved and the unfairness between individuals that that represents. I speak as the Bishop who has had major responsibility for changes to the Church of England clergy pensions scheme and the reduction in benefits that is involved in that. I have had to present those to the General Synod and I bear some of the scars for doing so. I am under no illusions as to the difficulty of this task for the Government.

I fully accept the arguments for equalisations and those based on longevity to which the noble Lord, Lord Boswell, has just been speaking. Change is needed, but I cannot accept that this speed of change is necessary. From my own experience, from my clergy postbag, and from my postbag about the Bill, I know that the two things that potential pensioners most resent are changes to their expectations with comparatively little notice and perceived unfairness. These proposals fail under both those headings, and the amendments put forward by the noble Lord do much to mitigate that unfairness and failure.

Individuals find changes in pension planning extremely complex and difficult to implement on a personal level. Many of the women who are affected here have taken time out to care for elderly parents, having worked long enough to qualify for the full pension. They have done that deliberately and they have responsibly assessed the way in which they are approaching retirement. Now they are simply being told, with only five to seven years’ notice, that they will have to cope on existing resources for one or two more years than they had anticipated—and than they had been told to anticipate as recently as the last changes in 2007. That is actually draconian for a group of individuals, notably the women, mentioned by the noble Baroness, Lady Howe, who were born in that month of March to April 1954. They face an immediate two-year increase in their state retirement age. Some 33,000 women are unfortunate enough to have been born in a particular month. It is not a tiny number, although it may be a small proportion of those who in one way or another will see a reduction in their pension expectation through the timetable of the Bill. We are often exhorted to plan carefully for retirement. It is understandable that people see little point in doing so if, for some, the goalposts are then moved to the other end of the pitch. This may not technically be retrospective legislation, but in practice that is exactly what it is for a significant number of women.

It causes changes to expectations at short notice and, secondly, unfairness. The proposals as they stand create a situation in which a woman born in 1950 obtained her pension in 2010 whereas her sister, born in 1954 and four years younger, has to wait until 2020 for hers—a six-year increase in the pension age, the best part of a decade between the times these sisters receive their pensions. When we look at the figures, it is easy to see the need for change, but we must also take account of the unfairness that that creates between neighbours, family groups and work colleagues, and the tension and pressure on friendships and relationships. That is why we need to think again on the timetable. The changes in the Bill bring no additional savings until 2016. The savings do not contribute to tackling the present economic crisis. It is a matter of justice for a significant number of women that we change that timetable today.

--- Later in debate ---

[Lord Boswell of Aynho]

I am grateful to the noble Baroness, Lady Greengross, for moving her amendment, which is cognate with one that I moved in Committee. I have to say I was somewhat shaken by the Minister’s response because I do not normally go around as a fiscal incontinent. However, I accept the reproof of the noble Lord, Lord McKenzie of Luton, at my loose speech in my previous intervention on this issue when I quoted his cost at £10 billion per annum. That is of course a net present-value cost, and my cost, if I may call it that, is £7 billion per annum. Unless I have misread the amendment, the noble Baroness’s cost is very slightly more generous than mine would have been.

These are big sums but my point earlier, which I wish to talk about now, is that in making a macroadjustment—which I believe is essential and for which I established a case on which we have just triumphed—there is nevertheless a very real problem for individuals. I should say, if there is any doubt, that I have a certain background, if only because I have a household that is 80 per cent female, or was before my daughters grew up. I have no lack of sympathy with women’s issues and am well aware from the data that many women look forward to a less than generous pension and have not had an opportunity to build up the entitlement that some men have. Those are the data. We are gradually, by degrees, achieving social advance.

There is now a suggestion that, in dealing with the major problem that we have to address, we may be affecting a particular group of women very hard. We have to answer the question of how we deal with it. In terms of the overall cost of a grand architectural amendment, I can see that that would be very substantial indeed, which, as I have already indicated to your Lordships’ House, might well fall on taxpayers and the active working population of today—our children and our grandchildren. That would have adverse consequences. We have to find ways other than that of dealing with it. It is possible that one could make some slight adjustments within the system by flexing the exact provisions of the Ministers or the proposals of the Government or the proposals of the noble Baroness, Lady Greengross, thereby sharing the cost between the various women who would otherwise be affected.

My concern, and it is a paradox, is that with the best intentions, as the Minister explained to us painstakingly in Committee, the equal treatment directive—I do not dislike the equal treatment of women and I do not as a matter of fact dislike the European Community—constrains us on sharing the burden with men, unless and until we have caught up to the common age of 65. The present arrangements are a derogation from equal treatment until we reach that equality of pension age which is inhibiting this process.

One way forward, which has been touched on briefly in the earlier exchanges, may be to look at something beyond the pension age of 65, or even 66, as a compensating adjustment for burden-sharing. An alternative approach would be to go for a specific targeted scheme, but there are some difficulties even with the law on that if one were to have a differential pension credit arrangement. I have asked the Minister some Parliamentary Questions on that. The cost is much lower, but it is indeed setting up a special scheme to try to sort out the problems of individuals.

If we could have a system whereby nobody went without their pension for more than 12 months, as the noble Baroness suggested, or something like that, we could reasonably argue, given the timescale—not perfect, not ideal, we have all accepted that—that that is something with which people could accommodate themselves. A doubling of their loss, or a further acceleration of the timescale, would not be acceptable.

I urge the Minister to try to find some acceptable approach, or to signal some acceptable approach, which can, within the constraints that have been mentioned, help this group of women who are seriously and significantly affected, where there is a sense of unfairness, or of harsh treatment, without as it were destroying the intentions or the efficiency of the overall change which we need to make. I hope the Minister will consider that very seriously. It is not a matter of party politics. It is a matter of a common feeling that we should try to do something. I very much hope that, one way or another, through our combined wisdom, or at least our combined persistence, we will reach an acceptable solution.

[Baroness Howe of Idlicote]

My Lords, I congratulate the noble Lord, Lord McKenzie, on his amendment and I thank everyone for the very warm support that it got. Obviously, I would rather that amendment had won, but the vote was indeed very narrow. With that in mind, I would certainly want to support the proposal of my noble friend Lady Greengross, which would certainly do something along the lines that the noble Lord, Lord McKenzie, was trying to achieve with his amendment.

If the Minister can find a way to accept that, it will give some comfort at least to those who feel strongly—and have shown how strongly they feel—about this issue. I hope he will bear that in mind when he comes to reply.