Pensions Bill

Lord Browne of Ladyton Excerpts

Tuesday 3rd December 2013 Lords Chamber

[Lord Browne of Ladyton (Lab)]

My Lords, I am delighted to follow my noble friend Lady Dean and I learnt a considerable amount from her contribution to this debate, some of which I shall draw on in my few remarks. I think most noble Lords will understand that I rise to the Dispatch Box with the words of my noble friend Lady Donaghy ringing in my ears, not just because she is sitting behind me but because she urged us in her opening remarks to approach this subject with a degree of humility. I do just that, as this is the first time in 16 years in one part of this building or another that I have had the lack of wisdom to debate pensions, and to do so from the Dispatch Box is a daunting prospect.

I open my remarks by thanking the Minister for his introduction. I thought that he laid out in a helpful way what this Bill seeks to achieve and I look forward to hearing him build on that in his response to the debate and throughout further consideration of the Bill. I have some experience of engaging with him in debate in your Lordships’ House and I know that he will do his best to assist the House to understand and, if necessary, improve this legislation. I thank him, too, for engaging with Members in all parts of this House in preparation for this debate and for his promise of further briefings. I join him in commending the noble Lord, Lord Turner, my noble friend Lady Drake and Sir John Hills for the work they have done; I add to that my thanks to my noble friend Lord Hutton and the noble Baroness, Lady Hollis of Heigham. I was privileged to work with her for a short time when I was the Minister for Employment in the Department for Work and Pensions.

If all those who deserve some recognition for their contributions to this debate will excuse me, while I hope to give them some recognition during these remarks I single out my noble friend Lady Drake. With an economy of words that was a model, she went through the Bill in a way that identified almost all the issues that many months of my trying to understand it had identified, if not understood, and some others that I had not even thought of. I can appreciate why she was on the commission led by the noble Lord, Lord Turner, and why she has had such a significant effect on the direction of travel. I also commend my noble friend Lady Sherlock, whom I am privileged to serve in this cobbled-together team for this purpose. She knows how much I admire her and I thought that she made a sparkling and excellent speech.

I congratulate the noble Lord, Lord Balfe, on an accomplished maiden speech. I have no doubt that the House will value greatly what appears to have been his long and varied journey since the age of 16. It took him all the way from 4 Millbank, which is just across the road, to your Lordships’ House. He referred to Millbank and the noble Viscount, Lord Eccles, referred to the Imperial Chemical Industries, or ICI, in his contribution. Since I am the survivor of a man who was an employee and then, for a short period, a pensioner of the ICI—my mother, who was widowed, was a pensioner of it for a significant period—I recognised the Millbank address as being very significant to the ICI. Those buildings are still there and at least the noble Lord, Lord Balfe, is still with us although the ICI is not. That just occurred to me as a relevant coincidence in the debate before your Lordships.

Turning to the issues raised in the debate, I start with my noble friend Lady Sherlock’s first question to the Minister, which challenged him to confirm the level at which the STP—the simple pension which we are all discussing—will be set. I do that because it seems to be the essence of our understanding of whether this significant reform of the pension system will meet the challenges that the Minister and others have set for it. There seems to be agreement that it needs to be high enough to provide an adequate platform for saving and to reduce means-testing. The problem is that, as we understand it, these reforms will reduce means-testing only if the flat rate pension is set above the pension credit level. Indeed, the Select Committee recommended that there should be some clear blue water between one and the other and argued further that that principle should be built into the Bill. None of us will be able to get a handle on whether this will, over time, consistently meet that condition unless we have some idea of the rate at which it is to be set.

Perhaps I may say in passing, and with all humility, to the noble Lord, Lord German, that this is assuredly not a citizen’s pension. A pension that requires 35 years of national insurance contributions cannot be described as a citizen’s pension.

Moving on, I am encouraged to draw the Minister’s attention to the questions asked by a number of noble Lords, including my noble friend Lord McKenzie, about the fact that all the documentation we have before us, set in the context of the impact assessment, assumes that the single-tier pension will be uprated by the triple lock. Of course, we know that the triple lock is in place only until the end of this Parliament and I am not suggesting that it is reasonable to expect the Government, or indeed any party aspiring to government, to promise the triple lock going forward. One does not know what financial circumstances or degree of growth there will be in the economy in those times. However, I would argue that if we are to understand fully the implications of this policy, and whether it meets the tests that we are all generating for it, we have to have some information against which we can compare the performance of this policy going forward. It would be much more helpful if the Minister could provide us with additional information, other than that which is in the impact assessment and has that assumption underpinning it. If there were alternative calculations provided to us that showed the other ways in which could it be uprated, or not uprated at all, that would give us some sense of whether this policy is dependent on the triple lock or whether, on its own terms, it can be sustainable into the future.

I turn to the question of the continued review of pensionable age, which was raised by my noble friends Lady Turner of Camden, Lady Hollis of Heigham, Lord Whitty and Lord Hutton of Furness. The noble Lord, Lord Balfe, also raised it in his maiden speech. I make it clear that we on these Benches recognise that, as life expectancy increases, it is reasonable to consider extending working lives. However, along with many other Members of your Lordships’ House, we believe that it is very important to consider a range of factors. One of those is that there are differences in healthy life expectancy between different groups and varying employment opportunities for continued working in later life. A number of noble Lords made reference to that.

It is our argument that the Bill needs to provide greater clarity about that process. It is also essential that people have sufficient notice of any changes in state pension age in order to make or revise their plans for retirement. To meet the first objective, we proposed consistently in the House of Commons an amendment that would have ensured that the panel set up to assess rises in longevity included representatives from opposition parties and trade unions. We also have concerns about the methods of periodic reviews.

On the second of these objectives, I point out to the Minister that only this month the Government themselves published a document entitled Reshaping Workplace Pensions for Future Generations, in which they conceded that:

“Our current thinking is that employers would not be able to adjust the”,

normal pension age,

“of anyone within 10 years of the existing NPA in the scheme”.

That concession—that advice—that they published in their own document brings into question a five-yearly review and the consequences of such a review. At this stage I am not seeking to argue beyond the amendment that we tabled in the Commons, and will probably repeat here in Committee and perhaps on Report, but it raises a question about the consistency of the Government’s thinking when that document, published just last month, can strongly make that point while the Government expect that the review of pensionable age will be every five years.

My noble friend Lady Hollis of Heigham made reference to part-time workers—I think she called them people in mini-jobs. As she identified, there is a group of people, mainly women, who have more than one part-time job but are below the national earnings limit in each job, so are not building up the rights to a future pension. In fact, as she pointed out, recent analysis found that in 2012-13 50,000 people—40,000 women and 10,000 men—had two jobs with a combined income above the lower earnings limit but were not accruing qualifying years towards their pensions. My noble friend argues, I think with some authority, that this is unfair and could prejudice hard working people who are doing everything possible to provide for themselves and their families at a time when full- time jobs are acknowledged to be in short supply. Characteristically, she has an innovative solution, which, as I understand it, is essentially that they be treated as self-employed. That would ensure that all those in work with total earnings above the lower earnings limit were building up rights to a state pension. I commend this approach to the Minister, and we will be interested, as I think other Members of the House will be, in the Government’s position regarding this. I suggest that the arguments that have been put forward thus far do not meet the challenge that my noble friend has set out.

My noble friend and others have concerns about the phasing out of the assessed income period. She makes the very good point that the phasing out of this period generates challenges relating to equity release to pay for care and its impact on pension credit when changes to capital are taken into account. While I am not arguing that the release of equity should be dependent on administrative easement that was meant for other purposes and may not be sustainable in the long term, we on the Front Bench do not disagree with the phased abolition of an assessed income period but we wish to use Committee to probe the evidence base for this change. We know that some elderly people struggle with correspondence, particularly official communications, and we wish to be assured that there is support in place for those who need it, with the additional burden that these provisions impose.

A number of noble Lords raised issues reflecting the dysfunctionality of the private pensions market. It is at the heart of this reform that, from a base of a single-tier pension, people are encouraged to save. As my honourable friend Greg McClymont has made perfectly clear, this will work only if they are saving into pension funds in which people have trust and confidence. At the Bill’s Second Reading in June, Greg made clear that our focus on the Bill would be on the half of the Bill that was missing—essentially, the part that would make private pensions value for money for the saver. The Pensions Minister responded throughout the deliberations on the Bill in the Commons in a relatively dismissive way to these suggestions—the Minister smiles; I think that he recognises some of the phraseology that was used—and resisted all our amendments throughout Committee, despite the fact that he recognised consistently that they were relevant to existing serious problems. Throughout that time, he was able to take advantage of the alibi that the OFT report had not been concluded. However, as many noble Lords have said, the OFT reported in a devastating fashion, confirming all our criticisms of the dysfunctional pensions market and raising the sword of a market investigation reference, which is still hanging over the pensions market pending Parliament’s completion of the Bill.

In response to that and the fact that the report expressly, or by implication, supported every one of our amendments, the Government performed a U-turn, but only in response to a part of the problem with charges. The Government have listened to the OFT report on charges and have done a U-turn, and that is welcome, but perhaps now they should listen to the other OFT recommendations, which include the areas that we have tabled amendments on. Indeed, the OFT has gone further than we did to make our pensions industry value for money for savers. We encourage the Minister to consider some of these issues in relation to transparency and governance of the pensions industry, which we will continue to urge.

In anticipation of this debate, I wrote myself a set of notes that said, “No one supports the Government’s line on pot follows member except possibly the ABI”. That was before I heard the speech from the noble Lord, Lord Paddick. I think that he was the lone voice in this debate supporting pot follows member. I say to him, again with some humility, that the Australian example that he encouraged us to follow comes from an entirely different environment. In Australia, as I understand it, there are several hundred pension schemes, whereas there are over 200,000 pension schemes in this country. This is an entirely different environment and the Australian analogy does not quite work.

I am conscious of my time and I shall endeavour not to go through all this now, saving some of these arguments for Committee. However, I am sure that the Minister knows the arguments that have been put forward by many, including the Centre for Policy Studies, as my noble friend Lord Hutton identified. Reading carefully the briefing we all received from the ABI, I am not entirely sure that it is still as supportive of pot follows member as it was at the outset of the debates on this issue.

I commend the right reverend Prelate the Bishop of Derby for a measured and informed speech in relation to bereavement benefits. He made a very powerful argument for consideration of the effect that bereavement can have on children and the importance of the support of parents. I do not intend to go into any more detail on this other than to commend to the Minister the questions that were asked by noble Lords who also made this point. It is an issue that we will to return to in Committee and later during the passage of the Bill.

There are issues about the consequences of the phasing out of contracting out. There are significant potential impacts on public sector and local government pension schemes. There is a related but not directly analogous issue in relation to protected pensions. I also commend to the Minister the observation made by my noble friend on this Front Bench and by the noble Viscount, Lord Eccles, that this is a framework Bill and encourage him to give us some indication about when we will see some of the regulations that inform the Bill.

Unusually, I want to refer to an issue that was not raised, but I promised my noble friend Lord Dubs, who is well respected in this House, that I would indicate to the Minister that my noble friend will raise in Committee the issue of Jarvis and the small number of employees who have lost out very badly in its pensions.

My noble friend set three tests in her opening speech. However, there is a series of other tests that the Government have set that we will measure this Bill and these reforms against, because the Government claim substantial consistent consequences for them. I think the Minister has comprehensive notice of them, particularly from the informed contributions by my honourable friend Greg McClymont, who went over the detail of this with some care. I think he can expect interesting and engaged debates in Committee and on Report. I was very struck by the number of times the Minister used the phrase “very complicated” or “very complex” when I was speaking to him earlier and he and his officials were giving me an explanation of what we can expect in the Bill. He is right about that. I stand before your Lordships’ House confident that behind me I have a significant number of Members who are comfortable with that complexity. One or two of them will be talking to me quite a lot before the later stages of the passage of the Bill. This is a reform that we broadly support, but we will challenge it every step of the way.