State Pension Reform

Oliver Heald Excerpts

Monday 4th April 2011 Commons Chamber

[Steve Webb]

I did write the hon. Lady’s words down—in principle, she welcomed the Green Paper, so I am grateful for her warm comments about our proposals. She asked a number of specific questions, and I shall try to respond to them.

The hon. Lady seemed to imply that women would get £145 anyway, so wondered why we needed to do anything. That, however, is decades away. Equality between men and women in the state pension system is decades away, and we think that is too slow. Many women who did their child rearing in the ’80s and ’90s got no state second pension protection because it did not exist at that time. They will be retiring over the coming years and we are now bringing forward that protection for them. We do not want to wait 20 years for equality.

The hon. Lady asked an important question about passported benefits and we will need to consider the implications of these changes for those benefits. She had the cheek to suggest that the winter fuel payment had been cut in comparison with what she would have provided if she were in office. She will be well aware that we are sticking precisely to the budgets that her right hon. Friend the Member for East Ham (Stephen Timms), the former Chief Secretary to the Treasury, wrote. He will know perfectly well how much he put aside for the winter fuel payments, and we are doing exactly what he planned.

The hon. Lady asked about the Pensions Policy Institute and its estimate that a £140 flat-rate pension would cost 1% of gross domestic product. What she may have misunderstood from the report is that the question it asked was what it would cost if that amount were paid to everybody. That is where its figure came from. We are saying that we will create this for new pensioners, because new pensioners face a new world in which they will work longer, retire later and have fewer final salary pension schemes, so we need a system that is fit for them.

The hon. Lady sought reassurance on two points and the answer is yes to both of them. We will honour past service and we will make an adjustment, as I said in my statement, for contracted-out periods.

The hon. Lady asked about the future of final salary pension schemes after 13 years of decline under Labour. She will be pleased to know that the National Association of Pension Funds—the trade body for company pensions —welcomes these reforms and supports them, but we are in dialogue with those operating large final salary pension schemes to discuss how these changes will impact on them and how we can work with them to move towards the sort of simpler scheme that they and we want to see.

The hon. Lady asked about merging what the Chancellor referred to as the operation of the tax and national insurance system, which is certainly at an exploratory stage, but he has made it clear that pensions will be protected under these changes and that the contributory principle will remain.

Finally, the hon. Lady asked about the mechanism for raising the state pension age. She referred to a crude formula, but there are options in the Green Paper. One is to have an automatic mechanism for raising the pension age as longevity increases; the other is to adopt a more nuanced approach to take account of a range of factors. We would welcome feedback on that.

Overall, I think the hon. Lady welcomed our proposals, particularly the fact that they will benefit women and self-employed people and will lead to a fairer system. She said that she wanted to see a fairer system; in office, the Labour Government never delivered one, but through this Green Paper, we will.

[Mr Oliver Heald (North East Hertfordshire) (Con)]

In welcoming the statement and the Green Paper, I congratulate the Minister on achieving a long-held ambition in the pensions world of creating much more certainty and transparency about the state pension system so as to encourage saving in the longer term, as well as on helping the more vulnerable groups he mentioned, such as women, who will get help that much earlier. Will he say more about the time scale? He talked about the long distance we still have to go before achieving justice for women, so what improvement will these changes bring and what is the Minister’s time scale?

[Steve Webb]

I am grateful to my hon. Friend, who brings his great knowledge of these issues to the House and to the Select Committee of which he is a member. As he says, we need a simpler system. He will appreciate that these things take time; we will need to consult and then respond. In due course, we hope to legislate to re-programme the computers and so forth. As the Chancellor said, we are talking about some years to implement the reforms, but we are clearly keen to move forward as fast as we possibly can.