State Pension Reform

Mark Durkan Excerpts

Monday 4th April 2011 Commons Chamber

[Steve Webb]

We are not changing the system for current pensioners at all. It will continue as previously budgeted. As for new pensioners, we need to think what paying a pension above the guarantee credit implies for passported benefits, and what sort of system we need. I should be interested to hear people’s ideas, because the issue is important. Hitherto, we have simply assumed that pension credit means poverty and that we must therefore make all the extra payments. We may need a more sophisticated system now, but the role of passported benefits is important, and I am grateful to the hon. Lady for raising it.

[Mark Durkan (Foyle) (SDLP)]

I thank the Minister for his statement and for providing us with the rationale behind it. As he will know, people will want to establish whether the single tier really does offer the platform for fairness and adequacy that he has described. They will want clarity and confidence.

The Minister mentioned the need for people to save money for their pensions. What consideration have he and Treasury Ministers given to their ability to afford that, given the hits that they are taking as a result of the withdrawal of some child benefit, the entry of more people into the 40% tax bracket, and the huge challenge posed by tuition fees?

[Steve Webb]

The hon. Gentleman has raised an important point about people’s ability to afford to save. One of the key aspects of automatic enrolment is the fact that an employee’s contribution will trigger an employer contribution of nearly as much, plus tax relief. If an employee contributes 4% of his salary, the employer’s contribution will raise that to 8%, so this is a very affordable form of saving. Of course we want to ensure that people who make such sacrifices in order to save will be better off as a result, and our reforms will make that outcome far more likely than it is at present.