Pensions Bill [HL]

Lord German Excerpts

Tuesday 1st March 2011 Grand Committee

[Baroness Murphy]

My Lords, I very much support the amendment of the noble Lord, Lord McKenzie, but I have to say I am very attracted to the halfway position, as it were, of the noble Lord, Lord Boswell. The difficulty is, as Machiavelli said, that you should not have a second line of defence—that you should just go straight through—so I am nervous in saying that I like the compromise idea but there is a basic serious unfairness to a very small group of women. We are talking about a one-off event over a period of three to four years, I think it is, and it would be a good idea to address this. If the halfway house makes more sense in overall financial terms, though, I would support that.

[Lord German]

There is a general sense that there is a group of people who are being treated unfairly because of the rate of acceleration, although maybe I will explain later that they shall actually be decelerating towards their pension. The general aspect here is that something needs to be done to ameliorate that unfairness. One of the key ways where that could take place, and I hope that the Government are minded to tell us about this, is to seek an upward revision and a much enhanced state pension as a right for all. That is an issue that would affect people in a much more radical way if it were the case. I have read many of the newspaper articles about the uprating of the state pension, but this seems to be almost a hand-in-glove issue. If you use the financing that comes from this measure and put it into a pot, you will be doing something to ameliorate the situation.

I am keen to examine the issue raised by my noble friend Lord Boswell about trying to make sure that we do not overly deal badly and unfairly with a particular cohort of people. The issue primarily relates to a singular group of women. This is a one-off group, because there will not normally be a similar group of people who are so badly affected by the one-year to two-year increase in such a rapid space of time. After all, there is an acceleration of something like three months in age and four months in pension age. You could not get much faster than that, unless you went to three months and 29 days, or whatever; you would be talking shades. It is a very fast rate of acceleration for a particular cohort of women, who will disappear when the system has worked its way through. That acceleration will not be apparent.

There must therefore be some measure which the Government can take to either improve the post-retirement abilities of women in this cohort or lengthen the timetable somewhat to accommodate the interests of a particularly badly-done-by group. When two people whose ages differ by as little as three, four or eight months, or whatever, stand shoulder to shoulder within a year, they will find that the differential in the rate of change in their retirement age is magnified. I hope that the Minister will reflect upon the amendments before us and try to see whether measures can be taken to ameliorate the situation of this group of women.

[Baroness Hollis of Heigham]

My Lords, like everyone else who has spoken, I support the amendment of my noble friend. We all agree—and I am sure that we will come back to this issue, following the point made by the noble Lord, Lord German—that what we also need is a decent state pension: the £140 pension espoused by his honourable friend Steve Webb in the other place, which would be transforming for both men and women in retirement. However, that does not address the issue here, which is about not just equalisation—no one disputes that—but the speeding up of that equalisation, including the very speedy additional year.

First, I suggest that that makes some easy assumptions that are false. Secondly, it has some unintended consequences that have perhaps not been considered. The first easy assumption is that because we are all living longer, we must work longer to support our old age. One understands the stats about the number of workers relative to the number of pensioners and the additional costs in the future of long-term care. However, increased longevity is not actually accompanied by increased years of full and healthy living, whereby one enjoys leisure, holidays and time with grandchildren. All the research shows that those extra years of longevity come with extra infirmity, particularly for those who are worse off. It is very much a class, as well as a gender, issue. Since the Black report, the health inequalities of those in the bottom E and D classes have widened, not narrowed, relatively—not absolutely, as obviously they have improved for us all.

Those extra years come with extra infirmity—fortunately not bed-bound infirmity necessarily requiring residential care but second-order infirmity, including the need for help with, for example, cleaning, transport, aids, appliances and care to allow you to stay in your own home. The implication is that the healthy years of retirement will be squeezed and reduced as retirement age increases, because you will not enjoy extra years of healthy living at the other end as a result of increased longevity. The first thing to address is the fact that we are squeezing the number of years people, particularly poorer people, can hope to expect to enjoy in retirement. The second assumption or myth is that women, as a result, will stay in the labour market longer and until they retire. That retirement age will increase first to 65 and then to 66. I do not know why we think that this will happen because it has not just been connected to the state retirement pension or even to the fact that employers have traditionally got rid of people at the age of 65. It has never been true for men. The majority of men leave the labour market at around 62 or 63 years old. It is even lower in Europe. In other words, half of all men have been on benefit for at least a year, sometimes two years or more, before they draw their state pension. Men compared to women have more secure and better paid employment. Therefore, they have more incentive to stay on until the age of 65. But they cannot and they do not.

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Moved by

[Lord German]

8: After Clause 1, insert the following new Clause—
“Additional financial support for certain women
The Secretary of State shall by regulations provide additional financial support for women born between the months of July 1953 and September 1955 to include one or a combination of the following— (a) pension credit adjustment;(b) providing for women with serious illness;(c) by slowing the rate of acceleration for a particular group of women.”

[Lord German]

My Lords, I declare an interest as a trustee of a pension fund for the National Assembly for Wales. I am not clear as to whether I should declare this at this particular point in the agenda, or whether I should do so at every occasion, but for the avoidance of doubt I will do so. There are five parliamentary procedures in this United Kingdom, and the one that I am used to would require me to declare an interest, and I hope that is the case and that it is the wish of this House that I do so as well.

This amendment is wide in its ability for interpretation, but very narrow in the group of people whom it affects. It is done that way on purpose. Whatever way you look at it, there is a particular group of women, in a particular age bracket, born between particular years, who are going to be adversely affected in a way that those who are outside that age bracket are not. It is that particular interest group to whom I want to address my remarks in respect of this amendment. The fact that this is the group who are accelerated more than anyone else is the reason for the amendment. I accept that, no matter what timetable you have for any acceleration, there is bound to be a group that will be more or less affected, and that there are bound to be some winners and some losers in that acceleration. However, as I described earlier, you could really not see a faster acceleration process in play than this, where a three-month increase in your age means a four-month horizon for your pension arrival date.

Already we have debated quite considerably the use of timetabling as a device by which to assist that particular cohort of people, but this amendment looks to provide support for particular groups. It does not specify which groups, clearly because there may be more groups that may be divisible in different ways, and there may be more groups than the Government can think of. Already this afternoon the noble Baroness, Lady Hollis, has described a characteristic that we could apply to the list, when she talked about her age-related premium in addition to JSA or ESA. It is not intended to do more than to provide a way for the Government to look at this particular group of women, who are finding themselves more disadvantaged than advantaged in the acceleration process that is going ahead.

It is rather like walking along a road with your colleagues and seeing the horizon in the distance, and, as you walk along, the horizon moves further from you, but the people who are walking along the pathway with you, who may be slightly older or slightly younger, see the horizon moving away at a different rate. It is the group that is seeing it move away furthest and fastest to whom this amendment is addressed. The impact assessment from the DWP quite clearly specifies that that group of people who are most disadvantaged will have the biggest financial hit. The summary of impacts says:

“A rise in State Pension age of one year is projected to decrease the lifetime pension income … by between 3 per cent and 5 per cent … based on DWP modelling … However, if they work to the new pension age”—

I shall come back to the mitigations that are already in place in the changes that the Government are proposing in the universal credit and the work programme—

“and save into a private pension, they would recover about half of this loss of lifetime pension income. For those individuals who will experience the maximum increase in State Pension age of two years, the potential loss is between 7 per cent and 9 per cent”.

Again, if you mitigate that by saving in a private pension scheme and working for those extra two years, you suffer a loss of about half of that. A one-year and two-year acceleration is quite different. If you follow my metaphor of moving along the pathway towards the horizon, those who are seeing the horizon moving away the fastest would suffer financially disproportionately to the others. It is that experience that I shall dwell upon in this amendment.

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[Lord Freud]

I thank my noble friend Lord German for tabling the amendment. We have covered a lot of the ground in relation to it already, so I shall try not to be repetitious. We are talking about what has been variously described as an acceleration bubble, a moving horizon or a squidgy balloon—as the noble Baroness, Lady Drake, said. We are effectively looking at concessions for women born between July 1953 and September 1955.

I am not in a position at this stage to provide any additional information about discussions on a single tier, which I referred to at Second Reading, but one of the issues here is clearly that when one looks at the complexity of the architecture, one has to have an eye to whatever might or might not emerge from those discussions. We have already talked about freezing or delaying the increase in the pension credit qualifying age for people affected by the changes in state pension age. We are not going to make a song and dance about technical drafting here, although the noble Baroness, Lady Drake, made the point about the application of the amendment to women, when it would actually have to apply to men. However, let us put that to one side.

The issue that I aimed to emphasise in the previous discussion was that pitching the pension credit qualifying age at a point below the state pension age for a specific group would undermine fundamental welfare reforms. However, it is not about just the structure—and I accept that this is about a temporary change—or purely the money; it is complex for customers and complex to administer. That is one of the reasons why that solution is difficult, if not undesirable.

In response to the request of the noble Baroness, Lady Hollis, for me to write to her on the costs of paying people in between the old and the new pension ages, I am happy to look at those costs and to write to interested noble Lords. I imagine that that includes most of us in the Room.

I move on to the issue of serious illness and emphasise that we have great sympathy for those with ill health, including those in this particular cohort of women. However, I must point out that help and benefits are already available for people with health problems and I do not therefore accept that we need to provide additional financial support, whether that is in the form of a payment above what we already pay out or some bespoke pension age arrangement.

The final option suggested by the amendment is slowing the acceleration of the pension age increase for these women.

I can assure noble Lords that, when we were considering how to bring forward the increase to 66, we looked at whether we could start that change for men slightly earlier than for women, to avoid altering women’s state pension age before 2020. The reason that we have not done this is because it would be unfair to increase the difference in treatment between men and women. It would also be unfair to prolong the difference in treatment beyond the period already agreed. I will take this opportunity to explain why, and I am picking up the question raised by my noble friend Lord Boswell earlier in the afternoon. The equal treatment directive allows the setting of the state pension age to be a limited exception to the overarching rule that men and women must be treated equally in social security matters. This exemption, or exception, is only temporary to give member states time to adjust their state pension ages so as to bring women’s state pension age into line with men’s. As we know, the legislation in 1995 set out a timetable for equalising the state pension ages between 2010 and 2020, so anything we do now will be measured against that timeline. That is why we decided that we must increase the state pension age to 66 only after women’s state pension age has reached 65. I therefore urge the noble Lord to withdraw his amendment.

[Lord German]

My Lords, when I started writing this amendment, I was trying to answer what seemed to me a fairly straightforward and simple question. There is a group of women, born between these years, who will suffer financially more than those who are roughly the same age on either side of them. The question I was seeking to answer was whether the Government will find a way of helping them. It is as simple as that. I was seeking to give the Government as much of an open hand as they wished, in order to say that they recognised that some of the people in this cohort will be suffering financially more than others, simply because of the date of their birth, which was the factor I wanted to take into account. I was not wanting to dwell on the method of operation, but I was seeking to find a way in which the Government might come forward with some opportunity for making sure that they redressed that financial imbalance in a way which they thought was reasonable, effective, and did not cost as much as the £7 billion or £10 billion which the Minister has already adhered to. I hope that, during the course of the future weeks before we reach Report, the Minister will reflect on that matter. There has been a widespread agreement around this Committee, from all sides, that there needs to be some form of redress for a particular group of women in a particular way which needs to be defined, and perhaps the department can look at that. I hope that the Minister will think of coming back to that matter by Report, with a view on how that might be addressed.

Amendment 8 withdrawn.