Pensions

Lord McKenzie of Luton Excerpts

Wednesday 13th December 2017 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Scott of Needham Market, for providing a further opportunity to focus on this important matter. We have had some powerful women’s speeches this evening, as well as one from the noble Lord, Lord Kirkwood. If I disagreed with anything in them, it was that I do not think we should allow Steve Webb to lay claim to auto-enrolment—although that is perhaps for another day.

Changes to the state pension age in recent times have involved both its equalisation for women and men, to age 65, and its increase for both men and women, currently to 66. The former was achieved by the Pensions Act 1995; the latter by the Pensions Act 2007 and the Pensions Act 2014, but primarily by the coalition’s Pensions Act 2011. The 2014 Act put the uprating of the state pension age on a statutory footing, linking the SPA to increasing life expectancy. John Cridland’s independent review recommended an increase to 68 in 2037 to 2039, which it is understood the Government have accepted. That is some 20 years away, which should enable ample time for effective communications and information activities.

The 2014 Act also adjusted the increase in the SPA to 67 to between 2026 and 2028, so the clock is ticking for awareness-raising for individuals due to be affected by this change. Leaving aside the process involved, we continue to support the principle of equalisation, which largely followed what was happening to occupational pensions and EU developments. Similarly, we support the principle of periodic increases to the SPA to reflect changes in longevity and the intergenerational fairness which this ensures, as well as to support sustainability.

The problem being confronted in this debate is the basis and manner in which the earlier changes to the SPA were introduced—the 1995 equalisation process and the 2011 acceleration of the state pension age to 66, with subsequent amelioration of the latter. The current position is that women’s SPA will reach 65 in November 2018, but increase more slowly to 66 by October 2020. The situation is therefore that women born between 6 April 1950 and 5 April 1953 have an SPA under the 1995 Act of between 60 and 63, and women born between 6 April 1953 and 5 December 1953 have an SPA under the 2011 Act of between 63 years and 3 months and 65 years. All of those originally had an expectation of a state pension age of 60. So in total, on top of the 1995 Act changes, the 2011 Act led to 4.5 million people in Great Britain having their state pension age increased by less than a year, 500,000 women by more than a year, and 300,000 women by 18 months. Some 2.6 million women overall are waiting longer to reach state pension age.

The WASPI campaign, as we have heard, is not disputing equalisation but complains about how all the changes were implemented and communicated, and the hardship that ensued for many women. We agree with the House of Commons Work and Pension Select Committee about adequate notice being necessary to enable individuals to plan for retirement. We have doubtless all received examples of how individuals’ hoped-for retirement has been blighted by not being able to access a pension: people having to hang on to an arduous job which they struggle to undertake; individuals having given up a secure job, in the expectation of a pension, not being able to return when the pension disappears into the future; individuals taking up caring responsibilities, saving the social care system in the process; and people just being without resources, with some going abroad.

Of course, we should see this in the historic context of women who, for a variety of reasons, have done less well under the state pension, albeit that over time this will change when state pension outcomes for women should equalise with those of men more than a decade earlier, but not until—would you believe?—2040. Women are still more likely to work part time, have periods out of the labour market, take up caring responsibilities and have lower-paid jobs. With the passage of time, many will by now have reached state pension age—all doing so under the 2011 timetable—and will be in receipt of the new single-tier state pension.

A key matter in determining a fair way forward, as others have said, is to seek to understand whether communication of all these changes has been robust enough and has created a genuine awareness of the implications for those affected by the 1995 and 2011 changes. The WASPI campaign asserts that government communications have been inadequate. This issue has been the subject of review and comment by the Work and Pensions Select Committee. The committee’s conclusion is that the DWP’s direct communications with those affected by the increases in state pension age until 2009 were very limited—and just before the commencement of the changes in 2010. There were more robust personalised letters, as we heard, between 2009 and 2014, but they were seemingly sent on average just over a year before individuals reached the age of 60. The Select Committee concludes:

“We will never know how many women … could not reasonably be expected to know that their state pension age was increasing … while the last and current Governments have done more to communicate state pension age changes … this has been too little too late for many women”.


This argues in favour of some form of redress, and a variety of transitional arrangements have been proposed. These include: bridging pensions, limiting the maximum increase for waiting to one year and reducing the speed of the 2011 Act increases. Some of these carry not insignificant costs, which of course cannot be ignored.

The Labour Party proposes two transitional measures: first, return eligibility for pension credit to the SPA timetable of the 1995 pension arrangements, but with qualifying age continuing to increase to 66. It is understood that this would have a cost over 10 years of something like £800 million; secondly, an early draw-down so that individuals could draw their state pension at age 64 but with an early retirement reduction of 6% per year. So anyone otherwise entitled to a full state pension who retires at 64 would receive something like £137 per week. This option would be available to 2.6 million women with dates of birth between 6 August 1953 and 5 April 1960. It should be cost neutral over the longer term.

We are a long way past the stage where an ideal outcome to the necessary process of equalising and increasing the state pension age could be achieved. But we consider that these proposals could go some way towards improving the lives of millions of women, and we commend them to the Government. Others have expressed incredulity that there has not yet been a meeting arranged with the WASPI campaigning team, and I urge the Government to do that. In any event, I know that my colleagues, together with those in the Commons, would be happy to do so.