Pensions Bill

Lord Paddick Excerpts

Tuesday 3rd December 2013 Lords Chamber

[Lord Paddick (LD)]

My Lords, perhaps I may start by declaring a couple of interests. I am already in receipt of a police pension and I thought that I would be in receipt of the state pension in 10 years’ time until I received a letter from the DWP telling me that it will now be 11 years. Some noble Lords may be intrigued as to why, as a former police officer, I am contributing to this debate. My main concerns are about the reforms to welfare that this Government have introduced. However, I am slightly less concerned about this Bill. Noble Lords also may wonder why I am contributing when there has been such a big build-up in terms of how interesting this subject is. I have to say that the contribution of the noble Lord, Lord Hutton of Furness, was fascinating more than interesting. I congratulate my noble friend Lord Balfe on his maiden speech, which may sound a bit cheeky coming from someone who made his only five minutes ago, but his wealth of experience will be very valuable in this House.

I support this Bill and pay tribute, as others have done, to my honourable friend the Pensions Minister, Steve Webb, and his team. This is a difficult subject for any government to tackle. It is to his and his team’s credit that they have taken it on. As the noble Baroness, Lady Sherlock, has said, there are three tests; namely, that pensions must be fair, sustainable and provide a decent standard of living. I believe that that is what this Bill does. Of course, it is up to your Lordships to test that during our debates at this stage, in Committee and on Report.

When the state pension was introduced in 1926, only half of those who reached the age of 15 were expected to live to the age of 65. On average, people would spend just over 11 years collecting their state pension. In 2013, 93% of 15 year-olds are expected to live to 65 and 32%, almost one-third, have a chance of reaching 100. Clearly, in terms of sustainability, things need to change. The level at which the new single-tier state pension is set appears to be reasonable, as has been said by the Minister, and is above the current state pension means test. It allows people to plan for their future on the basis of understanding what, at least in today’s money, they are likely to expect when they reach pensionable age.

The automatic enrolment of workers in pension schemes requires safeguards. This Government appear to have worked hard to ensure that those safeguards, including, as has been said, the very welcome capping of fees, are in place. I will talk about the “pot follows member” issue at the end of my remarks. The noble Baronesses, Lady Donaghy and Lady Sherlock, expressed concern about women born between 1951 and 1953 who will not be eligible for the single-tier pension whereas men of the same age will be. My understanding is that these women need to make only 30 years of national insurance contributions, as opposed to 35 years for their male colleagues. In addition, those women will be able to draw their state pension earlier than men, at some time between the age of 61 and 63. Men in the same age group will not be able to draw their pension until they are somewhere between the age of 63 and 68. Clearly, that is not a straightforward issue. Swings and roundabouts are involved.

As someone who has more than 30 but less than 35 years of qualifying national insurance contributions, I also might be concerned that I do not appear to qualify for a single-tier pension, which is currently set to be £144. However, I am reassured that, if the new system gives me more than the current £110, I will get that amount. If I would have received more under the old system, I will receive that amount. In short, while others may be better off than me under the new scheme, at least I will not be worse off. I ask whether these changes are to be brought about because of the need to be sustainable.

Clause 25 in Part 2 would increase the age at which the state pension becomes payable from 66 to 67 between 2026 and 2028 instead of between 2034 and 2036, as set out in the Pensions Act 2007. That is eight years earlier than previously planned but it still gives a lead time of 13 years, which will enable people to make provision for it. Surely, this makes sense when one takes into account the fact that, at the moment, life expectancy, I am reliably told, increases by four hours for men and six hours for women every day.

Clause 26 introduces a review of the state pension age, taking into account life expectancy and other relevant factors, every five years or, allowing for some leeway, every six years as stated in the legislation. These are difficult but necessary decisions from which previous Governments have shied away. This legislation ensures that future Governments will not be able to duck that responsibility. The first report would be in 2017. The Secretary of State will have to commission reports from the Government Actuary’s Department on life expectancy and from an independent, appointed panel on other factors to be specified by the Secretary of State. This Government have indicated that the panel will be similar in nature to the Hutton inquiry. It seems eminently sensible that not only life expectancy but other factors that may arise or change over the years are considered by an independent panel, provided there is sufficient lead time to enable those affected by such changes to plan for their retirement.

As noble Lords have said, differences in life expectancy in different parts of the country or among different socioeconomic groups need to be addressed. Surely those matters should be addressed by other means to try to equalise life expectancy in these different areas, rather than trying to equalise through pensions legislation. Most importantly, these reforms will ensure that the state pension remains available not just for my nephews and nieces but for their children as well.

On whether “pot follows member” would be the right system, my understanding is that Australia, a country that is held up as an example of good practice as regards pensions, now considers that it should have introduced such a system. The suggestion that this is the way that the country will go is encouraging. As regards ensuring that there are caps on fees charged by pensions providers, it is hoped that the minimum standards to be applied should ensure that if pot does follow member to a new employer, the new scheme will be as good as the one from which the money is being moved. Clearly, employees will have to consider into what pension scheme their money would be moved when they consider all other aspects of the remuneration package provided by the new employer.