Pensions

Lord Taylor of Holbeach Excerpts

Thursday 5th May 2011 Lords Chamber

[Lord Dykes]

To ask Her Majesty’s Government what representations they have received on their plans for a single state pension with an estimated value of around £155 at current prices.

[Lord Taylor of Holbeach]

My Lords, the Government’s consultation paper, A State Pension for the 21st Century, published on 4 April 2011, sets out two high-level options for state pension reform. Following the consultation process, the Government will be considering all the responses to our options for delivering a simpler and fairer state pension. The media reports of a £155 a week pension are based on speculation of how much this single-tier state pension could be worth if it is introduced in the future. However, no decisions have been made on how to change the state pension system.

[Lord Dykes]

My Lords, I congratulate the coalition on this far-reaching decision, which will help many pensioners in the future at whatever level the figure starts. What specific mechanism will the Government deploy to ensure equal treatment between the existing recipients and the new entrants to the state pension at the commencement date?

[Lord Taylor of Holbeach]

My Lords, the reform is based on future pensions rather than on existing pensions. We will seek to protect existing pensioners during the period of transition, but the future reform depends on the consultation exercise, and the mechanisms that we will use will be those arising as a result of that.

[Lord Tomlinson]

Does the noble Lord accept that two different levels of state pension—one for existing pensioners and one for new pensioners—are exactly the kind of injustice for which, in other circumstances, were it challenged at a judicial review, a challenge would be upheld?

[Lord Taylor of Holbeach]

The Government will seek to avoid such a situation. Indeed, that is the reason for the consultation. I think all noble Lords will agree that this is a necessary reform that needs to be addressed by the Government, who want to take things forward. The programme for this is not one of rushed implementation. It is likely to be legislated for not in this Parliament but in some future Parliament.

[Baroness Hollis of Heigham]

My Lords, I am sure the Minister will agree that it would be highly desirable to extend the new state single pension to all pensioners if it can be done within the cost framework and the time limits available. However, does he agree that the new single simplified state pension will not only substantially tackle pensioner poverty but, equally important for the future, will mean that it is safe to save? It will lift people above means-testing, and therefore every penny of their savings will be enjoyed by future pensioners.

[Lord Taylor of Holbeach]

The noble Baroness is exactly right. Of course, that is what lies behind the Government’s proposals.

[Baroness O'Cathain]

My Lords, will my noble friend take very seriously indeed the problem that will arise with pensioners who currently have a state pension but will not be raised up to the £155 level when the new pension comes into effect? These are the very people who have been so badly treated by the earnings link being cut and who have a lower pension than those in many other European Union countries.

[Lord Taylor of Holbeach]

My noble friend makes a very good point. We would expect people who traditionally do not build up significant amounts of additional pension, such as women and low earners, to gain under a single-tier pension. Conversely, those who expect to build up much more significant amounts of additional pension, such as higher earners and those with longer working lives, will no longer be able to do so under a single tier. So there will be a redistribution within the pensions system which the single tier will be able to operate.

[Lord McFall of Alcluith]

Given that two-thirds of those in occupational pensions presently face a life of poverty—that affects 20 million out of the present UK working population of 30 million—how confident are the Government that means-testing will be eliminated from the new state pension system? Have they any estimates for how many will still be means-tested after this policy is introduced?

[Lord Taylor of Holbeach]

We will publish full costings on the whole programme. I think the House will accept that the current situation has arisen over a period of several Governments. I hope the noble Lord will consider that the Government are doing the right thing in seeking to address the issue, but I cannot answer his question in detail.

[Lord Palmer of Childs Hill]

My Lords, have the Government found a way of ensuring that some women are not particularly affected by the changes? A small number of women seem to be suffering because of the changes. I hope the Government have found some way of alleviating that problem. Will that also affect additional benefits that might be claimed by those suffering in this manner?

--- Later in debate ---

[Lord Taylor of Holbeach]

I remind my noble friend that, as the noble Baroness, Lady Hollis, clearly indicated, one group of people who are likely to benefit from this introduction are women pensioners who have not had the opportunity to accumulate benefit through the current pension system.

[Lord McKenzie of Luton]

My Lords, the noble Lord, Lord Dykes, described these proposals as far-reaching but, as the Minister himself has acknowledged, there is a lot of uncertainty about what the shape of this will be, and indeed about whether it will ever come to fruition. One thing is very clear from the consultation document; there will be no new money attached to it. There will therefore be not only issues of equity between existing pensioners and new pensioners but, among the new pensioners, clearly some element of redistribution. Will the noble Lord say something about that?

[Lord Taylor of Holbeach]

In an earlier answer I indicated that there would be high earners over a longer working life whose accumulation of benefit would be less as a result of these proposals. However, the whole programme is designed to benefit those who have not normally, under the existing system, had the opportunity to accumulate a basic state pension that is adequate for their retirement. That must be the strategy that we seek to address. Anything involving pensions is a long-term programme and must seek consensus across Governments if we are likely to succeed.

[Lord Mawhinney]

My noble friend said with some confidence earlier that legislation in this area would be for some future Parliament and not for this one, and that it is the Government’s policy that no amount of extra money will be added to this proposal. Given that we are talking about implementation following legislation a number of years hence, in what financial circumstances would my noble friend consider the possible addition of extra money to fund the proposal?

[Lord Taylor of Holbeach]

I cannot speak for future funding that will be available to the Government for this or any other programme. At the moment, as far as government finance is concerned, we all know that we seek to tackle the deficit. This is a priority within Government, but I note the underlying subtext of my noble friend’s question.