Pensions Bill [Lords]

Richard Drax Excerpts

Monday 20th June 2011 Commons Chamber

[Richard Drax (South Dorset) (Con)]

It is a pleasure to follow the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson)—I hope I have pronounced that correctly—although I do not entirely agree with what she said.

I want to congratulate the Secretary of State and the Front-Bench team on this Bill. This is a time-bomb that has been waiting to go off for years. The Labour party looked at it, sniffed it and walked away because it stank. It does stink. It is going to require a huge effort by this Government, particularly from the Pensions Secretary, for whose diligence I have huge admiration.

It has been long apparent that something had to give. As has been mentioned many times in this debate, our longevity has increased nationally by an average of 10 years since the 1970s. Today’s pensioner numbers have doubled since the 1950s and the increase is accelerating. The Office for Budget Responsibility has estimated that pensions will cost a stunning £32 billion by 2015—up by a third from today’s figures in just four years.

The problem was not created by the coalition, and neither is it exclusively our responsibility. Having packed the public sector to the gunwales, the last Government were well aware of the oncoming crunch, and had legislated to raise the state pension age to 66. The old understanding that public sector employees could rely on secure jobs with more generous final salary pensions as compensation for low pay is outmoded now. The pay gap has not only narrowed but reversed.

Figures from Policy Exchange for the past year show that the average public sector worker is now paid 35% an hour more than the average private sector worker, and Office for National Statistics figures tell us that in the year before that, the average public sector worker earned £2,000 more per annum than his or her private sector equivalent. Today private sector workers are worse paid, have less security of tenure, and have more fragile pensions than their public sector equivalents, but under the current arrangements they are expected to subsidise the more generous final salary pensions in the bloated public sector. They are understandably embittered, as, paradoxically, are the public sector workers, many of whose jobs were created by the last Government. They now feel threatened.

But deal with the pensions time bomb we must. The private sector has absorbed many shocks. So that we can survive the economic downturn, pensions, along with salaries and bonuses, have been hit hard. Final salary pensions are fast becoming a distant memory, even in larger firms, and new employer rules on automatic pensions enrolment which are due to come into force next year are likely to have further detrimental effects.

The public sector, however, needs a culture change. The current arrangements are simply unsustainable and unaffordable. The bottom line is that we all need to pay more into our pensions for longer, which means that the age at which we retire will be higher: it will be 66 by April 2020. The last Government legislated for that, but their legislation will be accelerated by this Bill. We will also need to supplement what we already pay with increased contributions.

We are told by Treasury Ministers that if we make these changes now, there is a chance of a decent and relatively generous pension for all entitled public sector workers. We are also assured that 750,000 of the lowest-paid public sector workers will not be asked to pay more, and that the extra contributions of another 500,000 will be capped. I am relieved to hear that the pensions of those who risk their lives serving their country—members of the police, fire service and military—will be protected.

Raising the state pension age to 66 and upwards will take years to implement, even on the revised timetable, and I am anxious to ensure that some worthy recipients do not slip through the net. Like others who have spoken today, I have received many letters and e-mails from people who are very concerned about the proposals. Mainly they are from women. The equalisation of the pension age, causing theirs to rise from 60 to 65, and the subsequent acceleration causing it to rise to 66 by 2020, appear to have left some unintended victims by the wayside. I ask the Secretary of State and the Treasury to think again about those cases.

In particular, women in their late 50s who were told to prepare for retirement at 65 have now seen the goalposts moved again. Overall, 5.5 million women now aged between 51 and 57 are affected to a greater or lesser degree, and 330,000 of them— those given less than two years’ notice of the change—are particularly badly affected. There will not be enough time for the women caught up in the scheme to save enough to address their loss. Many are among the lower-paid, 40% have private pensions, and many part-timers were excluded from occupational pension schemes until the 1990s. Moreover, members of that age group are more likely to be economically inactive owing to caring responsibilities. Perhaps an interim measure can be introduced to ensure that they are paid what they have worked for, and that the longer gap before they reach the state pension age does not cause unnecessary hardship. After all, those women worked through the years of genuinely lower pay in the expectation of a comfortable retirement, only to see it evaporate.

What matters most in this debate is to find a way to make our pensions fairer, more affordable and as generous as possible, while taking into account the changes in life span and the sheer numbers involved. I know that that is the intention, but now, for all our sakes and those of our constituents, we must make it a reality.